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The South Korean branch of the global cryptocurrency exchange HTX known as Huobi Korea announced on December 29 that it is preparing to cease its operations on January 29. The company cited a difficult business environment as the reason for its closure. It was stated in the announcement that users would still be able to withdraw funds from the exchange after the closure.
Huobi Korea’s Noteworthy Decision
Founded in 2017, Huobi Korea had severed ties with HTX, formerly known as Huobi Global, in January 2023. In a statement made by the Huobi Korea team regarding the matter, it was stated:
“Considering the current business environment, the company is inevitably ending its crypto asset service.”
The closure of Huobi Korea follows the closure announcements of other small South Korean crypto exchanges Cashierest and Coinbit in November. Another platform, CoreDAX, also suspended its exchange services and reported that operations were postponed for several months.
According to the latest report by the Financial Services Commission (FSC), as of June 30, 2023, the top five exchanges in South Korea, namely Upbit, Bithumb, Coinone, Korbit, and Gopax, account for 99.6% of the total crypto trade volume in the country. These five exchanges have successfully registered with local financial regulators.
South Korea and the Crypto Market
South Korea enforces strict standards for local crypto exchanges following an amendment to the financial reporting law in 2021. Exchanges must partner with a local bank to offer fiat-to-crypto services. Partner banks regulate deposit and withdrawal accounts for crypto exchange users to minimize risks of money laundering or price manipulation.
According to official records, a total of 21 exchanges, including Huobi Korea, failed to secure a bank partnership and only met the minimum information security requirements. These exchanges were permitted to offer limited services for crypto-to-crypto transactions. According to an FSC report, 10 out of the 21 exchanges with limited product offerings failed to generate revenue from crypto transaction fees in the first half of 2023.
South Korea is expected to implement the Crypto Asset Investor Protection Law in July this year, which will impose more responsibilities on exchanges to protect user funds. These responsibilities include holding at least 80% of total user funds or an equivalent value in a cold wallet and registering insurances to guarantee compensation to users in case of hacks or system failures.
