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Korean Virtual Asset Exchange, Real Name Account Issuance Countdown

3/29/2021

With the revised Korean Specific Financial Information Act (SFIA) that regulates virtual asset providers in effect on the March 25th, exchanges that have not yet issued real-name confirmation deposit and withdrawal accounts from banks have started to prevent customer churn.

According to industry sources on the March 29th, virtual asset exchanges such as Gopax and Gdak started a real-name account pre-booking event. If a real-name account is issued from a bank in the future, the main point is to give benefits to users who have reserved the account linkage in advance.

According to the Special Financial Information Act, virtual asset exchanges wishing to provide KRW deposit/withdrawal service must obtain a real name account from a bank and report it to the Korean Financial Information Analysis Unit (KoFIU). The deadline for reporting is until September 24th, when the six-month grace period ends.

If a real-name account cannot be issued, only other requirements such as ISMS (Information Security Management System) certification are met, and the KRW deposit/withdrawal service can be abandoned. However, if the KRW deposit/withdrawal is not provided, the market competitiveness is lowered, so most exchanges are in a position to obtain a real name account before the reporting deadline.

The problem is that before issuance, a customer can leave to another exchange. Currently, there are four exchanges in the market that have partnered with banks such as Bithumb, Upbit, Coinone, and Korbit. Accordingly, exchanges that do not yet have real-name accounts decided to hold pre-booking events to prevent customer churn.

Gopax is holding an event that gives a total of 2,000 won worth of bitcoin (BTC) through a lottery to 106 pre-bookers until April 19th. In addition, if a real-name account is issued in the future, coffee gifticon will be paid to all members who linked the account after pre-booking.

An official at Gopax said, “This is to show our customers our will to issue an account. We emphasize the fact that real-name accounts can be issued before the reporting deadline, and we want to prevent customer churn.”

Earlier, it was reported that Gopax is discussing issuing a real name account with BNK Busan Bank. However, in this regard, it was known that the contract was not in progress, only the account linkage test was conducted.

Gdak will hold similar events until April 23rd. It is an event that presents 10,000 won worth of bitcoin (BTC) to 1,000 customers who have previously applied for account linkage through a lottery.

Gdak said, "Applicants for pre-reservation for real-name accounts can receive the fastest news of the account service provision." He then emphasized that it had already met other requirements besides real-name account, saying, “Both exchanges and custodial services have completed information protection management system (ISMS) certification.”

So account real name issue is more important than before for digital asset exchanges.

Korean Bitcoin Kimchi Premium, 5 Million Won More Expensive Than U.S.

3/28/2021

The so-called 'Kimchi Premium (KIMP)' phenomenon in which the price of domestic virtual assets is higher than that of overseas is rising again. Until the beginning of this year, the 'Reverse Premium' of which foreign transaction prices were higher than the domestic price continued, but the recent enthusiasm for investing in domestic virtual assets is heating up and there are signs that Kimchi Premium is intensifying.

The virtual asset industry said, "As domestic individual investors are buying a lot of virtual assets, the supply is not keeping up with the demand." He diagnosed that the amount of coins in the exchange itself is decreasing.

The Kimchi Premium phenomenon, in which the price of domestic virtual assets is traded higher than that of overseas, has recently emerged prominently.

Kimchi Premium can also be interpreted as meaning that Korean investors will buy virtual assets at higher prices than the global market price. For this reason, when the Kimchi Premium phenomenon occurs, general investors who buy virtual assets in Korean won in Korean virtual asset exchanges may be at a disadvantage.

As of the afternoon of the 25th, bitcoin (BTC) is being traded in the range of 64.6 to 64.7 million won on the four major domestic virtual asset exchanges, including Bithumb, Upbit, Coinone, and Korbit. On the other hand, the Bitcoin price of Binance and Bitfinex is formed at 59.7 million won. This means that up to 5 million won of bitcoin living in Korea is more expensive.

Along with Bitcoin, Ethereum (ETH), another virtual asset leader, also has a kimchi premium of 8% as of the 25th. The Ethereum transaction price of all four domestic exchanges is around 1.95 million won, while the Ethereum price of foreign virtual asset exchanges such as Binance and Bitfinex is only 1.8 million won.

Until the beginning of this year, there was a reverse premium for foreign virtual asset transaction prices. This is because, as U.S. listed companies and conglomerates announced their bitcoin investments and business successively from the end of last year, the buying trend of bitcoin by institutions centered in North America was remarkable. An industry official diagnosed, "Since last year, the trend of selling bitcoin in the Asian market and buying bitcoin in the North American market has continued."

Given the high demand for bitcoin acquisition in the overseas virtual asset market, some domestic investors have also earned market profits by sending bitcoins to foreign virtual asset exchange wallets to trade.

However, as the domestic stock market was sluggish this month, the flow of funds from the stock market to the virtual asset market was detected. KOSPI, which had an average transaction value of 26 trillion 4,778 billion on January of this year, decreased by more than 40% to 15,204.7 billion this month. On the other hand, the average daily trading value of Upbit jumped from 1 trillion won to 10 trillion won during the same period.

An official from a virtual asset exchange said, "Last year, global conglomerates led the price increase, and until the bitcoin price soared, there was no significant change in the domestic market." The transaction volume itself has increased significantly,” he explained.

There is also an analysis that the convenience of domestic virtual asset trading compared to other countries played a part in the Kimchi Premium phenomenon. An official from a virtual asset financial company said, "The Korean exchange's KRW trading system is much more convenient than the foreign exchange's legal currency trading," and said, "In this environment, Kimchi Premium is being formed as many individual investors are buying virtual assets.

Korean Special Information Act Law Enforcement, Points to Note for Virtual Asset Investors

3/17/2021

As the amendment bill of the Specific Financial Information Act (Special Act) that regulates virtual asset business operators is being implemented from the March 25th, attention is also focused on whether there are any points that general investors should pay attention to.

The Korean Financial Services Commission announced at a state council meeting on the 16th that the revised bill for the enforcement ordinance of the special money law was decided. The amendment to the enforcement decree specifically stipulates the matters entrusted by the decree regarding the obligation to prevent money laundering (AML) of virtual asset providers.

First of all, the scope of virtual asset providers became clear. This includes exchanges, custodial (trusted) companies, and wallet companies. This is not the case when simply providing a P2P (person-to-person) trading platform or a wallet platform without fees.

Virtual asset business operators must report to the Korean Financial Information Unit (KoFIU) and operate by September 24th, when the grace period ends. At this time, there are requirements for acceptance of the report.

In the case of exchanges, it is necessary to secure information protection management system (ISMS) certification, and to secure a real name confirmation deposit and withdrawal account from a bank to support the deposit and withdrawal service in won. The obligation to prevent money laundering, such as customer verification, reporting of suspicious transactions, and actions taken by virtual asset providers, must also be fulfilled, but violations are subject to supervision after acceptance of the report.

The factor that most affects investors in the special money law is whether the exchange continues to operate. Currently, there are only four exchanges that have received real name confirmation deposit and withdrawal accounts from banks: Bithumb, Upbit, Coinone, and Korbit. Exchanges that use a so-called honeycomb account (a corporate account of an exchange) other than a real-name account must report business with a real-name account by 24th September, the deadline for reporting.

After the filing deadline, we cannot provide KRW deposit/withdrawal service to a honeycomb account. If the KRW deposit/withdrawal is not provided, the market competitiveness is deteriorated, so some exchanges may give up reporting and fail.

Investors should be careful not to suffer damages related to this. The Korean Financial Services Commission said, "We hope that you should check the status of reporting by existing business operators (exchanges) and whether or not the business continues, and make virtual asset transactions.

One more thing to note is that the virtual asset business operator who has not received the report collects the resident registration number. The KoFIU recommends that existing virtual asset business owners perform the customer verification obligation (residence registration number verification) under the Special Act after acceptance of the report.

Therefore, when a business operator (exchange) that has not received a report collects a resident registration number, it is necessary to check the information management status of the business operator and whether the business continues.

In addition to monitoring the business continuity of virtual asset providers such as exchanges, there are points that need to be prepared in practice. Industry insiders said that investment should be avoided for virtual assets that are “only listed” on certain exchanges.

As the virtual asset market is booming in recent years, some exchanges are accelerating listing. In particular, if a promising virtual asset is listed alone, it is advantageous in terms of exchange revenue because it can secure initial transaction volume. As a result, many exchanges are promoting the brand by proposing 'single listing'.

However, with the enforcement of this special law, it has become difficult to predict whether the exchange will continue to operate. If you have a large amount of virtual assets listed on an exchange that is scheduled to close, if the exchange closes, there will be no place to trade the virtual assets. Since you cannot transfer money to other exchanges, you will in fact suffer money loss.

An official in the domestic virtual asset industry said, "After the enforcement of the Special Act, investors should pay special attention to coins listed solely on specific exchanges. It is possible that the exchange will cease to operate."

"Also During the grace period after the enforcement of the Special Act, it is recommended to look at virtual assets that are listed on various exchanges and have rich liquidity."

Korean Virtual Asset Market Volume Increased

3/7/2021

As interest in the virtual asset market, such as the surge in bitcoin this year, increased rapidly, the amount of daily virtual asset transactions in Korea exceeded 8 trillion won. This is an increase of more than eight times from the average daily transaction amount of 9,759 billion won last year.

This is at least three times more than in late 2017 and early 2018, when the domestic virtual asset trading fever blew up, and it can be interpreted as setting an unprecedented record in the domestic virtual asset investment fever in 2021.

On the 8th, the Democratic Party's Office of Representative Kim Byeong-wook surveyed the status of virtual asset transactions on the four major domestic virtual asset exchanges such as Bithumb, Upbit, Coinone, and Korbit. Virtual asset transaction amount recorded 445 trillion won. Last year, the total amount of transactions for one year was 356 trillion won, but this year, the amount of transactions for less than two months exceeded the total amount of transactions for one year last year.

According to the data on the volume of virtual asset transactions collected by Congressman Kim at each virtual asset exchange, the amount of virtual asset transactions, which had declined every year since 2018, jumped in quantum in 2021.

The total transaction value of virtual assets increased from 619 trillion won in 2017 to 936 trillion won in 2018, and then halved to 487 trillion won in 2019. The total transaction value of virtual assets, which fell to 356 trillion won the following year, soared to 445 trillion won by February this year.

The average daily trading value also showed a similar pattern. Compared to 2018, when an average of 2,565 billion won was traded per day, the average daily transaction amount this year recorded 7.94 trillion won, more than tripled in three years.

An official from a virtual asset exchange supported this by saying, "We are enjoying an unprecedented boom, with the total daily transaction value of major domestic virtual asset exchanges reaching 20 trillion won at the beginning of this year."

On the other hand, according to the results of the domestic virtual asset market monitoring results of Representative Kim's, the number of virtual asset investors this year increased from the previous year, but it was low compared to the end of 2017 to the beginning of 2018. Until February 18, there were 1.59 million members who made transactions at least once on the four major virtual asset exchanges in Korea, 450,000 fewer than 2,400,000 in 2018, and nearly 400,000 from last year's 1.2 million.

It is noteworthy how long the preference for virtual asset trading will continue in Korea.

Worst Week Ever? No, Bitcoin Will Rise Again!

3/1/2021

Last week, in foreign media dealing with the news of virtual assets, the expression “worst week” came out a lot. This is because bitcoin's decline was large, and the price of bitcoin (BTC) based on the coin market cap has fallen by more than 18% over the past week.

Considering that bitcoin has only continued to rise this year, the decline is significant. However, the term ‘healthy adjustment’ is also coming out because the news of Tesla’s bitcoin investment is much higher than the price before it was announced.

Virtual Asset Analyst Joseph Young commented on Twitter, saying, “We predict that the price of bitcoin will gradually recover.” The basis for this is first, Coinbase premium has turned to ‘+’ and second, miners have already sold a lot of bitcoins.

Coinbase is the largest virtual asset exchange in the United States, and is widely used by “whales” and institutional investors in the United States. When the buying trend of US investors is strong, there will be a 'Premium' that has a higher bitcoin price on Coinbase compared to other exchanges. Higher premiums mean that American whales are buying more bitcoins.

According to Cryptoquant, the premium, which was sometimes '-' from the 25th to the 26th, completely turned to '+' after the 27th. It means that the buying trend has started again. Cryptoquant CEO also said, “Coinbase premium has turned to '+' through Twitter. They (whales) are coming.”

Some believe that the buying trend has weakened due to the decline in Grayscale's bitcoin trust premium.

In Grayscale, a digital asset manager, there is a bitcoin trust 'GBTC'. Institutional investors who purchase GBTC have a mandatory holding period of 6 months. After 6 months, you can sell your reserves through OTC trading. Investors who buy GBTC in the OTC market can buy GBTC without a mandatory holding period. So, instead of having a mandatory holding period, you pay a premium and buy GBTC. We are accepting the current premium because we expect the price of Bitcoin to rise in the future.

However, as the premium fell below zero, there was an opinion that the demand for bitcoin decreased.

In response, Cointelegraph, a media specializing in virtual assets, analyzed that "This is because demand has shifted to Bitcoin ETF." It is an analysis that the demand of investors for bitcoin has moved to another product rather than a decline.

The Bitcoin Listed Index Fund (ETF), which began trading in Canada on the 18th (local time), raised $600 million (approximately 670 billion won) in one week of launch. It is analyzed that investors who were reluctant to invest directly in bitcoin with the launch of the ETF also started investing. Cointelegraph said, “GBTC was the preferred product when there was no bitcoin ETF.” Demand has shifted to bitcoin ETFs in part.

In the long run, the price of Bitcoin is expected to rise again.