Many of South Korea’s 200 crypto exchanges are facing an “existential crisis” as they struggle to meet the conditions for regulatory approval to shake one of the largest cryptocurrency markets in the world.

In order to obtain a business license as a legal trading platform, Korean exchanges must work with local banks to open real bank accounts for customers. However, the banks fear that this could make them liable for money laundering in digital currencies.

Now the Financial Services Commission faces a September 24 deadline and only a handful of exchanges are expected to meet the requirements, reflecting the pressure on the thousands of crypto exchanges that have sprung up around the world as global regulators shift tighten the market.

“Many in the [global crypto] The industry fears a scenario with four regulated exchanges, similar to that in South Korea, ”said a manager of the crypto market.

South Korea’s crypto trading is dominated by four major exchanges – Upbit, Bithumb, Korbit, and Coinone. They are expected to survive as they have connected with banks like Shinhan, Nonghyup, and K-Bank to offer real accounts for cryptocurrency trading. Upbit and Bithumb said they were preparing to register with the FSC.

Smaller exchanges say the new regime favors the largest operators at their expense. “We are facing an existential crisis. We want to legitimize our business, but the banks are reluctant to offer us real accounts, ”said Lee Chul-ie, head of Foblgate, the fifth largest exchange in the country with 100,000 members.

“More problems will arise if all of these exchanges are operated in the gray area. We may have to take our business offshore. ”

However, some experts said that more regulatory scrutiny was needed as many exchanges in the country lacked investor protection and transparent transactions.

“The market is overcrowded with too many trading platforms. Official registration is required to clean up the market, although confusion may arise in the short term, ”said Hwang Seiwoon, a researcher at the Korea Capital Markets Institute.

The likely shutdown of many exchanges could dampen the crypto frenzy in South Korea, one of the most dynamic crypto markets in the world, as the country joins a global crackdown on digital assets whose prices have come under pressure since mid-April after a surge earlier this year.

Young South Koreans have proven to be avid buyers of virtual assets, which has helped the price of Bitcoin in Korea soar compared to other countries like the United States. That premium has fluctuated dramatically, but rose over 20 percent last week, according to data provider CryptoQuant.

“The new law gets right to the point,” said a senior bank official. “Given the risks associated with trading cryptocurrencies, it will be difficult for us to do new deals with crypto exchanges unless the government gives us a clear policy.”

Banks’ conservative policies have been exacerbated by the latest warnings from tax authorities about crypto investments. Bank of Korea governor Lee Ju-yeol said in February that cryptocurrency has no “intrinsic” value.

Speaking at a parliamentary hearing last month, Eun Sung-soo, the country’s top financial regulator, said, “My honest feeling is that [investors] Do Not Enter [this market]. Cryptocurrency cannot be recognized as a currency, so the government cannot protect those who invest in virtual assets. “

South Korea has an oversized population for crypto trading. Daily turnover on local exchanges exceeded $ 20 billion, more than three times the daily volume of stocks traded by retail investors in the country.

It remains a largely unregulated market, however, which has led regulators to crack down on “illegal virtual asset activity” during a “special enforcement phase” from April to June.

The government also plans to impose a 20 percent tax on capital gains of more than 2.5 million won ($ 2,200) from trading cryptocurrencies starting next year.

These measures have not stopped young people from buying digital coins amid high youth unemployment and rising house prices.

“For me, the stock market is boring with little volatility. You can get rich quick with crypto investing, even if the risks are higher, ”said MH Chang, a 30-year-old tennis coach, although his Won30m investment in cryptocurrencies has recently halved.