South Korea to ban cross-trading on Bitcoin exchanges

Regulator to ban cross-trading on crypto exchanges.

The Financial Services Commission of South Korea (FSC) will ban the so-called cross-trading on cryptocurrency exchanges. Newsis reports.

This practice allowed the crossing of buy and sell orders for the same asset to occur without registration and settlement. Перекрестная торговля is banned on most leading stock exchanges worldwide.

In FSC’s view, crossing of opposing orders constitutes a “conflict of interest” and raises risks of price manipulation, because exchanges have internal information about client orders.

The decision is part of amendments to the Act on Reporting and Use of Certain Financial Transaction Information.

According to local media, the ban will curb inflows of funds to crypto exchanges, which previously faced regulator pressure. It will also affect operators who convert cryptocurrency commissions into won.

In practice, the measure could mean excluding revenue from trading fees. Anonymous sources said that a way out of the situation could be to establish a new business to convert commissions into fiat; given strict AML standards, this would not be cheap, the sources said.

Crypto exchanges may also face tax complications. They pay taxes in won, while commissions are charged in digital assets. This could necessitate obtaining fiat loans secured by cryptocurrency.

The FSC urged crypto exchanges to address the issue themselves.

The amendments will require operators to hold at least 70% of client funds in cold wallets. The regulator believes this would mitigate the impact of potential hacks. The FSC plans to investigate past attacks to identify potential insider involvement.

As previously reported, in Q1 2021 South Korean banks processed 64.2 trillion won (~$57.9 billion) in transactions on accounts verified with cryptocurrency exchanges, exceeding the total for 2020.

In June it emerged that from 2023, residents of South Korea must disclose information about accounts on overseas Bitcoin exchanges.

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