Crypto Exchanges in South Korea to Pay $220,000 in New Supervisory Fees

Big news! South Korea’s latest regulatory changes are set to impact major cryptocurrency exchanges like Upbit and Bithumb. Under the updated regulations, these platforms will now be required to pay supervisory fees, which could pose challenges for some exchanges.

Overview of New Fees

In the latest move towards crypto regulations, the Financial Services Commission announced on July 1 the revised ‘Enforcement Decree of the Act on the Establishment of the Financial Services Commission, etc.’ and updated ‘Regulations on the Collection of Financial Institution Contributions, etc.’ As per the local news, these regulations mandate that virtual asset operators pay supervisory fees for inspections conducted by the Financial Supervisory Service starting next year. The total fees for four major exchanges are estimated at approximately 300 million won, or around $220,000.

Breakdown of Fees

Upbit, holding a dominant market share, is expected to shoulder over 90% of the total fees, amounting to roughly 272 million won ($199,592) based on its operating revenue. Bithumb will pay an estimated 21.14 million won ($155,157), while Coinone and GOPAX will contribute around 6.03 million won ($4,422) and 830,000 won ($608), respectively. Korbit is excluded from these fees due to its lower operating revenue.

Impact on the Industry

These supervisory fees will function similarly to a quasi-tax for financial institutions subject to Financial Supervisory Service inspections. The new law requires any business with an operating revenue of 3 billion won or more to pay this fee. 

Historically, fees for electronic financial companies and P2P investment firms were phased in over three years. Still, the imposition on virtual asset operators has been accelerated, reflecting the rapid growth of the crypto market and increasing regulatory scrutiny.

Industry Reactions

The swift introduction of these fees was unexpected by some industry insiders, who had anticipated a delay. Financial Supervisory Service officials justified the decision by noting the formation of the related organization and the costs already incurred. 

While larger exchanges like Upbit and Bithumb can bear this cost, smaller platforms such as Coinone and GOPAX, which are currently operating at a loss, may face additional financial burden. This comes amidst a broader trend of declining trading volumes for South Korean exchanges, which have seen a 30% drop since the new law was implemented.