Korean Exchanges Struggling in a Down Market: How to Diversify Business
With the sound of warnings about the bursting of the digital currency bubble and the continuous strengthening of state supervision, the digital currency market in South Korea has fallen sharply, and local exchanges are struggling to survive in the future.
Controversy surrounding encrypted exchanges
MarketWatch recently reported that some companies have started to use the blockchain technology to diversify their business, but a series of events has damaged the public’s trust in the encryption market and may hinder the actions of these exchanges.
Last week, South Korea’s second-largest crypto exchange Bithumb announced plans to cancel the cryptocurrency of Popchain, as the public has criticized Bithumb for trying to quickly promote Popchain’s presence in the market.
Earlier this month, prosecutors raided the office of Upbit, the country’s largest exchange, in Seoul and suspected them of fraud.
Continuing disputes around digital currency exchanges hindered the rebound of emerging markets after a sharp decline .
Strong government supervision
Last year, with the boom in the global cryptocurrency market, many investors in South Korea, especially young people, poured into the cryptocurrency market in hopes of making quick money.
Today, South Korea has become one of the most prosperous trading venues in the world. The volume of transactions increased sharply in 2017, accounting for more than 20% of the total global transaction volume. At Bithumb, monthly trading volume increased from 300 million won in January last year to 56 trillion won in November (51.94 billion U.S. dollars).
In response to the global regulatory wave, the Korean government has implemented a series of regulatory measures this year, such as the real-name trading system. Minister of Justice Park Sang-Chie even said that the country is considering a bill that prohibits cryptocurrency transactions.
“The daily volume reached about 4 trillion won in January, but it has fallen to one-tenth in the past few weeks.” Vice-President Lee Jeong-ah of Bithumb stated in a local forum in April that he also complained. “The government regulatory regulations are “too strict”.
Exchange seeks business diversification
In the face of huge market fluctuations and a tough regulatory position of the government, local exchanges are trying to find new directions by using blockchain technology.
Bithumb has been trying to establish a business in the payment market. It has reached agreements with several e-commerce companies and online payment systems to promote the development of digital currency, hoping that it can be used like legal currency.
Dunamu, who runs Upbit, decided to invest about 100 billion won (93 million U.S. dollars) in the next three years to bring vitality to the entire blockchain industry. As part of the investment plan, Dunamu will work with game developer Neptune and each will spend 5 billion won to invest in a game company based on blockchain technology .
Coinone, another major exchange in the country, is moving out of Korea . Last month, it established a branch in Jakarta and became Korea’s first exchange to seek entry into overseas markets. The company plans to launch trading services later this month.
“With diversified efforts, we must first ensure the smooth operation of their trading systems to ensure their development potential.” Wu Zhengen, IT Finance Professor at Seoul University, said, “Lack of reliability will lead investors to leave the market forever.”
On the day that the prosecutor raided Upbit, Bitcoin fell by 10% and since then has continued to hover at 9 million won (US$8,340).
Analysts said that the next market pull will take time.
Author: Marko Vidrih
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