Domestic Crypto Exchanges Call for Regulatory Reform on Overseas Expansion [Crypto Briefing]

[Financial News] With Binance, the world’s largest crypto exchange, finalizing its acquisition of GOPAX, the domestic exchange market is on high alert. Industry insiders point out that just as foreign exchanges are entering Korea, it is time to revise regulations to enable domestic exchanges to expand globally.
According to the virtual asset industry on the 20th, there are significant obstacles when domestic crypto exchanges attempt to enter overseas markets directly. While current laws do not explicitly prohibit such expansion, sharing Order Books across borders is banned under guidelines from the Financial Intelligence Unit under the Financial Services Commission (FIU).
This is why the industry views direct overseas expansion by domestic exchanges as practically impossible. Order Book sharing allows crypto exchanges to share buy and sell orders. If a domestic exchange establishes an overseas branch and shares its Order Book, foreign investors could trade based on price fluctuations in the Korean market. The South Korean won (KRW) is the second most traded currency for crypto after the US dollar, offering foreign investors access to Korean market liquidity.
However, financial authorities maintain that Order Book sharing is not permitted even if a domestic exchange sets up an overseas branch. The reason cited is the high risk due to difficulties in implementing Anti-Money Laundering (AML) and Know Your Customer (KYC) measures for foreign investors, as required by the Act on Reporting and Use of Specified Financial Transaction Information.
It is also virtually impossible for foreigners to use domestic exchanges such as Upbit and Bithumb. To use a domestic exchange, one must open a real-name account with a partner bank, which is only possible for foreigners who have a long-term stay and a Korean registration number.
Currently, the only way for domestic exchanges to expand overseas is by establishing or acquiring a local subsidiary. In such cases, they must comply with local regulations, and Order Book sharing is restricted, meaning they can only operate the exchange. Even then, financial authorities often treat this as 'offshore business by domestic exchanges' and apply strict domestic regulations.
As a result, exchanges emphasize that their overseas operations are 'partnerships,' but progress has been limited. In 2018, Upbit established its subsidiary, Upbit APAC, covering Singapore, Thailand, and Indonesia. However, due to foreign exchange regulations prohibiting overseas remittances, it shifted to a partnership model, providing only its brand and technology without equity investment. Currently, Dunamu holds no stake in Upbit APAC.
In May 2019, the global exchange Bithumb Global was launched. However, only the Bithumb brand was used, and an independent overseas entity managed operations. Bithumb has consistently emphasized that Bithumb Global is a partnership. After rebranding to Bithumb Global in 2021, trading volume gradually declined, and the exchange is reportedly no longer in operation.
Experts argue that regulatory revisions should not only focus on tightening controls but also on fostering industry growth in response to changing circumstances. Suk-Jin Hwang, a professor at Dongguk University, stated, “Regulations should reflect overall market conditions and global consistency. Authorities are currently focused solely on regulation, but they should also consider policies that promote industry development.”
An industry official remarked, “At present, there are many restrictions on domestic exchanges seeking to expand overseas,” adding, “There needs to be a foundation that allows domestic exchanges to pursue global expansion.”
yimsh0214@fnnews.com Im Sang-hyuk Reporter