Many large cryptocurrency exchanges that had daily exchange volumes surpass $900 million (1 trillion KRW) in 2017 are suffering from reduction of exchange volume and their brands as they cannot receive new virtual accounts from banks and are under close supervision by South Korean Government.
On the other hand, it is shown that small and medium exchanges are operating so-called ‘hive accounts’ while South Korean Government’s supervisory authorities are focused on large exchanges. Many investors are starting to use these small and medium companies that are secretly operating illegal accounts.
There is even a reverse discrimination controversy as large exchanges that have been keeping guidelines according to policies are the only ones that are suffering. They are pointing out that direction of South Korean Government’s policies is leaning too heavily on their sides.
According to industries, large exchanges such as Bithumb and Upbit are having their exchange volumes go down as they have yet to receive new virtual accounts from banks over 8 months. As a result, they cannot invest into blockchain startups and carry out various projects that they have been planning.
Bithumb and Upbit have been placed out of top 10 based on exchange volumes of their coins recently while Coinone has not even placed in top 50.
According to a cryptocurrency exchange ranking site called Coinhills, Bithumb and Upbit were placed 6th and 7th places respectively based on exchange volume back in May. Coinone (0.34%) and Korbit (0.12%) were placed 27th and 39th respectively. Although 3 biggest exchanges in South Korea had maintained their top rankings despite many unfavorable factors, situation has taken a sudden change when this month started.
Coinzest (2.01%), Bithumb (1.73%), Cashierest (0.65%), Upbit (0.62%), and Coinone (0.06%) were placed 7th, 10th, 19th, 22nd, and 56th places respectively. Ranking has taken a sudden change as exchange volumes of large exchanges have dropped greatly.

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Cryptocurrency exchange industry explains that this change has started to occur as financial authorities’ complacent supervision has created blind spots.
“South Korean Government is only targeting large exchanges and is managing them as they under a blacklist.” said a representative for a cryptocurrency exchange who requested anonymity. “While South Korean Government has been so focused on large exchanges, small and medium companies have started to operate many hive accounts that has triggered investors to change their exchanges.”
Hive account is an expedient where small and medium exchanges are operating normal corporate accounts as banks have stopped to issue new virtual accounts due to dangers of cryptocurrency trades.
Because it is not a real-name account, it is hard to define origin of fund when number of traders goes up and there is a high chance of errors. It is also very vulnerable towards hacking.
When South Korean Government introduced real-name cryptocurrency transaction system back in January, it practically declared prohibition of hive accounts. However, even after 6 months since the introduction, many small and medium companies are still operating hive accounts through expedient. Ways of using hive accounts are also shared within blockchain-related communities.
“Because large exchanges are not issued new virtual accounts, many investors are switching to small exchanges that are operating hive accounts.” said an investor who is actually using one of these small exchanges. “Although we know that this is an expedient, we were told that there is no issue and we actually receive many benefits such as Airdrop.”
However, large exchanges are complaining that this is a reverse discrimination. But because they cannot do what small exchanges are doing as their acts retrogress government’s policies, they are placed between a rock and a hard place.
“Because commercial banks are not issuing us new virtual accounts, South Korean Government has caused a situation where investors are flocking towards small and medium companies that are operating hive accounts.” said a representative for a large exchange. “Although supervisory organizations and financial industries claim that they have stopped issuing new accounts to protect investors, they actually caused illegal accounts, which cannot be managed, to grow in numbers.” There is even an elevated level of danger towards investors.
“To protect people, South Korean Government must inspect small exchanges that are operating hive accounts immediately.” said a representative for another exchange.
Staff Reporter Gil, Jaeshik | osolgil@etnews.com

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<■Changes in ranking based on exchange volume in the past 3 months ▲5/20 ∆6th place: Bithumb (3.76%) ∆7th place: Upbit (3.75%) ∆27th place: Coinone (0.34%) ∆39th place: Korbit (0.12%) ∆41st place: GOPAX (0.10%) ∆46th place: Hanbitco (0.06%) ∆60th place: Coinnest (0.02%) ▲8/27 ∆7th place: Coinzest (2.01%) ∆10th place: Bithumb (1.73%) ∆13th place: Coinzest (0.65%) ∆22nd place: Upbit (0.62%) ∆46th place: CPDAX (0.12%) ∆53rd place: Coinlink (0.07%) ∆56th place: Coinone (0.06%) Reference: Coinhills >