South Korea’s Financial Services Commission has moved to ban cross trading on crypto exchanges in the country.
Trick . is part of a fleet of an amendment For the country’s act on the reporting and use of certain financial transaction information.
Cross trading, an illegal practice in many jurisdictions, involves offsetting buy and sell orders for the same asset (at the same price) without recording the transaction on the order book.
However, according to a report good Exchange operators in South Korea have mourned the planned prohibition, by local media outlet Newsys, saying the move would cause significant disruption to their already tense operations.
According to some South Korean crypto exchange operators, the planned move will stop the flow of funds into their platform.
Exchanges in South Korea reportedly cross trade in order to convert the fees they charge in crypto to Korean Won (KRW). Commenting on the practice, an industry executive told Newsys:
“In order to convert the cryptocurrency received as a fee into KRW, you have no choice but to sell the cryptocurrency at your place of business.”
The ban on cross trading would theoretically prevent the platform from being able to transmit these fees from crypto to fiat currency. In fact, the planned ban could mean mandatory zero-commission trading, eliminating the revenue that would have accrued from trading fees.
According to the unnamed source, South Korean crypto exchanges will be forced to create a new business to convert trading fees to fiat currency. However, such a move would come with significant cost implications as the country’s anti-money laundering policies would make it costly to operate such an enterprise.
Apart from impacting exchange revenue, the move could also create significant challenges for tax payments. Indeed, withholding tax is levied on exchange trading fees, which means that the platform will have to find a means to convert fees received in crypto into winnings as taxes cannot be paid in cryptocurrencies in South Korea.
As a stop-gap measure, crypto exchanges in South Korea may be forced to use fee payments received in cryptocurrency as collateral to obtain loans to prevent tax payments.
The FSC, meanwhile, has reportedly been baffled by the criticisms made by the exchange, stating that cross trading is a “conflict of interest”. According to the FSC, exchange operators have access to internal information and allowing them to trade against clients can lead to price manipulation.
On the subject of how exchanges will handle fees collected in crypto, the commission said, “Whether you want to convert cryptocurrency into any other asset (besides winning) or hold cryptocurrency, you will need to find a solution yourself.”
As previously reported by Cointelegraph, FSC recently held meeting with 20 crypto exchanges in country. In the meeting, several small and medium sized platforms informed the Commission about the difficulties being faced in their operations.
Apart from the ban on cross trading, the upcoming amendments will mandate exchanges to hold at least 70% of customer deposits in cold wallets. The provision is reportedly part of a countermeasure against crypto exchange hacking, which the FSC is planning to investigate. past attacks To highlight potential insider participation.