Bitcoin enthusiasts found themselves with fewer trading options this weekend after stricter rules left only four cryptocurrency exchanges operating in South Korea. That means that roughly 60 operators have been removed from the market.

On the same day, Beijing banned cryptocurrency transactions and mining in China, including outlawing overseas exchanges from providing services to the country’s citizens.

Due to its strategic position, South Korea is often regarded as the canary in the coal mine for global economics. But while it would be tempting to see the tougher regulatory landscape in both China and Korea as a sign that times may get harder for ethereum evangelists, some market stakeholders actually welcomed the news.

“News of crypto bans in China, Korea and elsewhere have been a recurring story in the crypto industry for years,” Oleg Giberstein, COO and co-founder at Coinrule, the automated cryptocurrency-trading platform, tells Verdict. “In reality, much of it was usually exaggerated.

“In the case of Korea specifically, I would consider the news as overall positive for the market. Korea is not banning bitcoin or crypto, it is regulating the market. Having regulatory clarity is a good step for exchanges.

“The ones who have been approved by the government will consolidate their market leading position and build on it. Over the long-term this will attract more, not less, users to the industry.”

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What happened with South Korea’s exchanges?

The news about South Korea’s crackdown shouldn’t come as a shock. As Verdict has previously reported, Seoul has been warning that tougher trading rules were coming for months.

And that’s on top of the former Financial Services Commission (FSC) chairman Eun Sung-soo making no secret of his views on bitcoin, ethereum and other blockchain-based digital assets.

In April, Eun said cryptocurrencies “have no intrinsic value…[and] are not a real currency. I would advise people not to invest in cryptocurrencies. It’s too risky to trade [cryptocurrencies] considering their high price volatility.”

Eun’s successor, Koh Seung-beom, who took up the mantle in August, has voiced similar concerns, pointing at international regulatory trends making it increasingly difficult to recognise cryptocurrencies as legitimate financial assets.

Given that both the old and new top dogs at the regulator have criticised digital tokens, it’s hardly surprising the FSC announced new rules back in March that have now resulted in the massive cull of South Korean cryptocurrency exchanges.

The new rules require both domestic and foreign crypto exchanges to subject themselves to assessment from the Financial Intelligence Unit before they are even allowed to make an application to trade to the FSC.

The rules also require platforms to register using their real names, bank accounts and to prove that they meet stringent anti-money laundering rules. The AML rules require the exchanges to pass a security check with the nation’s internet watchdog.

Moreover, to be allowed to operate in South Korea, cryptocurrency exchanges must also partner with a bank.

Those are the rules that exchanges had to comply with by Friday 24 September or they’d have to shut down their South Korean services.

“Thank you for supporting us. Good Bye!”

As the deadline passed, only four exchanges had passed the vetting of the internet regulator and inked partnerships with traditional banks: Upbit, Bithumb, Coinone and Korbit.

Smaller vendor Gopax had also tried to meet the deadline by partnering with a local bank, but the deal apparently fell through when the bank declined the partnership, Korea JoongAng Daily reported.

The Gopax website now only has a message on it saying that it has closed down operations because of the new law, adding: “Thank you for supporting us. Good Bye!”

Following the closure of the great majority of cryptocurrency exchanges in South Korea, commentators have voiced concerns about the lack of competition in the market, with Korea JoongAng Daily even referring to it as a de facto oligopoly, mirroring perhaps the country’s unshakable and lengthy economic rule by its chaebol giants. Those giants so far seem to have no skin in the cryptocurrency game; the closest chaebols may have got was with the NHN-backed OKCoin Korea, which shut down around the time when the original FSC deadline was meant to pass before being extended.

The sentiment about competition echoed that of a group of small and midsize exchanges earlier in September, who warned that the rules would “allow for a lopsided monopoly to emerge,” as reported by Fortune.

Upbit alone held about 80% of the nation’s market in August, thanks to some extent to its partnership with Kakaobank competitor K-Bank.

But does it matter?

Despite concerns about the cryptocurrency crackdown in South Korea leading to just a few players dominating the market, not everyone is too worried about the new status quo.

“South Korea clamping down on cryptocurrency exchanges is one of those things that sound scary for retail investors but is unlikely to have any significant impact on prices and is seen as a long-term positive for the crypto industry,” Nicklas Nilsson, senior analyst at GlobalData and the author of a new thematic research report on blockchain, tells Verdict.

Instead of worrying about the onslaught of businesses closing shop, Nilsson argues that this may actually be a good thing.

“While there have been some fears that the regulations will lead to crypto exchange monopolies since traditional banks are more likely to partner with established players, those concerns are largely unfounded as there is an abundance of both domestic and foreign centralised exchanges,” he says.

“There has also been a boom in decentralised exchanges. So-called ‘Kimchi coins’, smaller and less liquid cryptocurrencies that are developed and traded by Koreans, are likely to be affected the most. What the regulations are expected to do is kill off the smaller, less compliant exchanges and that is seen as a long-term positive for the crypto industry. It will only help to legitimise the crypto space and simplify its use for prospective investors.”

Others, like Uldis Tēraudkalns, CEO of Nexpay, believes the tightening rules in South Korea could even present international players with new opportunities. Nexpay, based in Lithuania, provides banking infrastructure for the digital assets industry.

“This might be an opportunity for the likes of Coinbase and Kraken to establish dominance in new markets that look for more regulated and transparent exchanges,” Tēraudkalns tells Verdict.

“The immediate losers will be smaller exchanges who can’t afford to adhere to the new rules as well as the holders of different smaller coins that are being only traded on the smaller South Korean exchanges. With any closures of those exchanges, the liquidity for these coins will also dry up and that will leave many small investors holding the bag.”

China crackdown continues

The news that South Korea’s cryptocurrency exchanges are closing shop comes as neighbouring China is also putting the screws on its blockchain money market.

Beijing has been coming down hard on digital currencies and the platforms supporting the trade of them for years. However, it turned up the heat this summer when the People’s Bank of China ordered four state-owned banks and the leading Ant Group-backed mobile payment app Alipay to cut off all transactions linked to bitcoin and other cryptocurrencies.

On Friday, China upped the ante even more by banning cryptocurrency transactions and mining, including barring overseas exchanges from providing services to mainland investors via the internet. Several exchanges, including Huobi Global and Binance, halted the signup of new clients and said they’d start cutting ties with clients over the weekend.

Chinese regulators are increasingly viewing cryptocurrencies as speculative instruments, much like the US’ Securities and Exchange Commission (SEC) and the UK’s Financial Conduct Authority (FCA). Both the SEC and the FCA have increased their efforts lately when it comes to reeling in the Wild West of digital assets.

What separates China from the others is just how far its clampdown on the market has gone. The recent ban falls short of barring ownership of cryptocurrencies outright, but it is seen as paving the way for Beijing’s digital Yuan.

Will China cryptocurrency trading endure?

Before the crackdown, China accounted for more than 75% of the world’s bitcoin mining, according to a study published in Nature Communications.

And that’s despite how Beijing has spent years trying to put the market under its control. Given how cryptocurrencies have endured in the face of China’s years of crackdowns, few market stakeholders Verdict has spoken with believe the new bans will be the end of the nation’s digital money market.

“What China is doing or wants to do is something impossible,” Tēraudkalns argues. “An extreme, but somewhat relevant comparison would be to prohibit people from producing, trading and consuming electricity.

“While the government can certainly make it hard for people to produce and consume electricity, it cannot prohibit people from understanding science or math and make them forget how practical and pleasant life with electricity is. I think it’s similar with crypto: with such high demand for crypto, it is inevitable that people will find a way to get their hands on and use crypto, even if formally it is prohibited.”

Others, like Pavel Matvee, CEO of cryptocurrency payment card provider Wirex, are more hesitant.

“Unfortunately, China’s ban on mining a few months ago did have an impact on public sentiment, as we saw it contribute to a rapid fall in the price of BTC and the demise of the crypto bull run as of this summer,” he tells Verdict.

Matvee notes, however, that not all countries are putting in bans. El Salvador famously made bitcoin a legal tender in September, albeit with ensuing technological glitches and riots on the back of it.

“Given these mixed messages and attitudes, I think it’s safe to say that China and South Korea’s recent decisions will not have a huge impact for bitcoin enthusiasts across the globe,” Matvee says.

The FSC did not return Verdict’s request for comments.

This story has been updated.