Crypto exchanges in South Korea to pay supervisory fees

Cryptocurrency exchanges licensed in South Korea will be subject to a supervisory fee. The new mandate is a part of the nation’s Virtual Asset User Protection Act.

Local media reports suggest that fees will imposed based on the operating revenue of the crypto exchange’s operating revenue for the past fiscal year.

Specifically, the fees are calculated using a contribution rate set at 2.686818 per 10,000 won.

As such, for every 10,000 won an exchange generates in revenue, it will be subject to approximately 2.686818 won as a supervisory fee to the Financial Supervisory Service (FSS).

Bigger exchanges will feel the pressure

According to estimates, the fees for leading crypto exchanges like Upbit, Bithumb, and Coinone could amount to 300 million won.

The supervisory fees will fund the FSS’s regulatory activities, including inspections and oversight, which ensure that Virtual Asset Service Providers (VASPs) operate within the guidelines set forth by the Virtual Asset User Protection Act.

However, this fee applies only to exchanges with operating revenue of 3 billion won or more in the past year.

For instance, crypto exchange Korbit will be exempted from this expenditure due to its revenue of 1.7 billion won last year.

Meanwhile, crypto exchange Upbit is expected to pay close to 272 million won ( approximately $200,000) based on its revenue.

The mandate was introduced as a part of the revised ‘Enforcement Decree of the Act on the Establishment of the Financial Services Commission, etc.’ and the updated ‘Regulations on the Collection of Financial Institution Contributions, etc.’ announced on July 1.

Initially, the implementation of this fee was expected to be delayed, but the process was fast-tracked due to the FSS’s upcoming inspection following the enforcement of the Virtual Asset User Protection Act that went live on July 19.

The Virtual Asset User Protection Act

Under the new law, various requirements for VASPs have been introduced, including a mandate to hold at least 80% of users’ assets in cold storage. Further, these funds must be segregated from company funds and have to be invested in “risk-free” assets to generate a yield.

Further, crypto exchanges will also reevaluate cryptocurrencies listed for trading, such as verifying their circulation and reviewing white papers.

Any crypto asset not meeting the given requirement would have to be de-listed.

The Virtual Asset User Protection Act was a direct response to the FTX and Terra Luna crashes. South Korea was a major market for both these entities, and their implosion resulted in billions of dollars worth of losses for South Koreans.

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