Survey: South Korean virtual asset service provider's 2021 net profit exceeds US$2.7 billion

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Summary:

• Summary:

• By the end of 2021, regulated South Korean VASPs facilitated more than $1.7 trillion worth of cryptocurrency transactions.

South Korea has been slowly building up its regulatory regime since the FSC banned fundraising through ICOs in 2017.

Korean virtual asset service providers (VASPs) made substantial net profits from trading activities in the first three quarters of last year, amounting to more than 3.3 trillion won (about 2.78 billion U.S. dollars), according to a survey by the relevant department of South Korea's main financial regulator. ).The survey, published March 2

The investigation is the first of its kind since VASPs were required to register with the Korean Financial Intelligence Unit (KoFIU) under the revised Reporting and Use of Specified Financial Transaction Information Act last year.

The FIU believes that the purpose of the survey is to gain a better understanding of the cryptocurrency market based on statistics provided by self-employed individuals.

As of the end of December 2021, a total of 29 virtual asset service providers have been approved, including 20 pure token exchanges, 5 crypto wallets and 4 Korean won-based exchanges. Since then, two additional wallets and two pure-play token exchanges have been approved, bringing the total number of virtual asset service providers legally operating in South Korea to 33.

Among these exchanges, Korean won-based exchanges dominate in terms of market share, with domestic operating profits accounting for 99.3% of VASP’s total operating profits, while pure token exchanges account for only 0.7%. Some exchanges that only offer crypto-to-crypto trading may undergo business restructuring due to a lack of competitive advantage, the regulator said.

The Korea Financial Intelligence Unit was established in 2001 as an organization under the Korea Financial Services Commission (FSC) to monitor and regulate financial markets and enforce policies related to anti-money laundering.

The survey shows that in the second half of 2021, the total transaction volume of the 24 virtual asset exchanges will be as high as 2,073 trillion won (approximately US$1.7 trillion), and the average daily transaction amount will be 11.3 trillion won (approximately US$9.4 billion).

South Korea’s regulatory regime has been slowly building up since the Financial Services Commission banned fundraising through ICOs in 2017. Although some local regulators still believe that current laws are not enough to combat money laundering, especially as cryptocurrency trading volumes start to catch up with stock trading volumes.

“Despite the high risk of money laundering in the virtual asset market, the current ratio (8%) of anti-money laundering (AML) personnel is insufficient and needs to be improved,” KoFIU said.