In July, major cryptocurrency operators such as Upbit, Bithumb and Coinone will now have to pay audit fees under the newly enacted Virtual Asset User Protection Act. This regulation is an important financial obligation introduced to increase supervision and surveillance in the cryptocurrency industry.

According to local media sources, this audit fee, which will be collected based on operating income, is expected to be around 300 million won ($219,992) for leading cryptocurrency exchanges. This can impose a huge financial burden, especially for small and medium-sized exchanges.

On July 1, the Financial Services Commission (FSC) revised the “Executive Regulations of the Law on the Establishment of the Financial Services Commission and Other Regulations” and the “Regulations on the Collection of Financial Institution Contributions”. These regulations envisage that virtual asset operators will contribute to audits carried out by the Financial Supervisory Service (FSS) starting from next year.

According to the new regulation, virtual asset operators will have to make a certain audit contribution to cover the costs of audits to be carried out by the FSS. This contribution will be calculated based on rates determined based on the operating income of the previous fiscal year.

The contribution rate for 2024 is 2.686818 per 10,000 won. According to this ratio, Upbit’s audit contribution is calculated as approximately 272 million won ($199,388). Coinone and Gopax will contribute approximately 6.03 million won ($4,422) and 830,000 won ($608), respectively.

Korbit is excluded from the audit contribution target due to its operating income of approximately 1.7 billion won ($1.2 million) last year. These fees will be charged as compensation for the supervision and services provided by the FSS and will only apply to firms with operating revenues of 3 billion won or more.

This new regulation poses significant challenges for many virtual asset exchanges. In particular, exchanges other than Upbit and Bithumb are experiencing operating losses, and these costs will impose an additional financial burden. Exchanges such as Coinone and Gopax will have to pay these audit fees despite their operational difficulties. This means additional financial pressure for many businesses in the sector.

Initial predictions in the industry were that the imposition of audit fees on virtual asset operators would be delayed. However, the implementation of these fees has been accelerated due to the entry into force of the Virtual Asset User Protection Act and the approaching inspections by the FSS.

In an effort to comply with South Korea’s newly enacted cryptocurrency user protection laws, a coalition of 20 local crypto exchanges will conduct a comprehensive review of 1,333 digital currencies over the next six months. This review will be conducted with the aim of increasing regulatory compliance for the cryptocurrency industry and closing security vulnerabilities in the industry.