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South Korea's top cryptocurrency exchanges, including Upbit and Bithumb, are now burdened with hefty supervisory fees under the new Virtual Asset User Protection Act.
Crypto Giants Hit with New Fees
The recently imposed Virtual Asset User Protection Act has a tremendous impact on South Korea's cryptocurrency business. tremendous operators like Upbit, Bithumb, and Coinone are now obligated to pay a supervisory charge.
The top exchanges are expected to pay a tax of about 300 million won ($219,992) every year, as reported by the local media. Some platforms may find this new funding requirement difficult to meet.
Revised "Regulations on the Collection of Financial Institution Contributions, etc." and the updated "Enforcement Decree of the Act on the Establishment of the Financial Services Commission, etc." were announced on July 1 by the Financial Services Commission (FSC).
FSS to Conduct Annual Inspections
These changes mean that beginning next year, operators of virtual assets will have to pay to have their assets inspected by the Financial Supervisory Service (FSS).
This change is in accordance with the Virtual Asset User Protection Act and places the FSS's inspection authority over virtual asset operators. A percentage based on operational revenue from the prior fiscal year is used to calculate the supervisory contribution for these operators.
Cointelegraph elaborates that assuming a contribution rate of 2.686818 per 10,000 won of operational revenue in 2024, Upbit is anticipated to contribute over 272 million won ($199,388), Coinone around 6.03 million won ($4,422), and Gopax about 830,000 won ($608).
Notably, with operating revenue of around 1.7 billion won ($1.2M) last year, Korbit is not included in the supervisory contribution target. In exchange for their guidance and assistance, the FSS asks for this payment. This fee is only applicable to companies with annual operating revenues of 3 billion won or more.
Financial Strain on Smaller Platforms
Nevertheless, numerous virtual asset exchanges face substantial obstacles due to this new rule. Operating losses persist for the majority of them, with the exception of Upbit and Bithumb. Coinone and Gopax, among others, will continue to incur losses as they are obligated to pay the supervisory share, which would further strain their already-strained financial operations.
Many in the sector had anticipated a postponement of the supervisory costs that virtual asset operators would eventually have to pay. Nevertheless, the impending FSS inspections after the Virtual Asset User Protection Act's enforcement prompted the hurried decision to apply these fees.
A group of twenty South Korean cryptocurrency exchanges has set out on a six-month-long mission to examine all 1,333 digital currencies in an effort to meet the requirements of the country's recently passed legislation protecting cryptocurrency users.
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