South Korean Exchange Suspends Withdrawals to External Wallets, Govt. Reaches Out to Apple and Google to Block P2E Apps

One of the four regulated cryptocurrency exchanges in South Korea, Coinone, has announced that it will no longer allow withdrawals to non-verified external wallets starting Jan. 24, 2022.

If Coinone users want to withdraw their crypto assets to another digital wallet, they would have to register their wallet address with the exchange, “in accordance with the fulfillment of the customer verification system obligation,” it said.

These external wallets include both hot and cold wallets offered by third parties. Since wallets like Ledger and MetaMask do not require KYC (know-your-customer information), Coinone users won’t be able to withdraw their funds to these wallets. But custodial wallets offered by other exchanges are verifiable by Coinone.

“It is impossible to register a wallet address that cannot verify identity information.”

The exchange has made this move to ensure that Coinone customers are not using crypto for illegal activities. As such, its users are required to register their wallets by submitting information such as name, email address, and phone number to withdraw funds.

Further Restriction on P2E Games

The South Korean government has also begun to block the release of play-to-earn games (P2E), according to a local report.

The regulators have also requested tech giants like Apple and Google to block these apps on their App Store and Play Store respectively. They recently strengthened the monitoring of blockchain games.

The Game Management Committee (GMC) under the Ministry of Culture, Sports, and Tourism recently sent an official letter to game operators to block the domestic distribution of these games.

The distribution of P2E games in Korea is being prohibited by the Game Commission based on the ‘prohibition of prizes' of the Game Industry Promotion Act. Under the Act, the winning prize is capped at 10,000 Korean Won ($8.43).

This year, we saw a rise in the popularity of P2E games, such as Axie Infinity, in emerging economies. Interestingly in South Korea, six of their ten best-performing stocks of the year either belong to the non-fungible tokens (NFTs) category or the metaverse.

Domestic gaming companies in the country have also released their P2E mobile games, but the government has asked them to be blocked by service providers.

Game companies have now started to counterattack as well. SkyPeople, the developer of ‘Five Stars for Clayton' whose rating was canceled, won the injunction lawsuit against the administrative disposition received from the Game Board in June. As such, until the lawsuit settles, the game can be distributed.

In South Korea, the games are required to get an age rating from the GMC before its domestic distribution. In case they are being distributed through other app stores, like those of Google and Apple, they can rate themselves. GMC said in a statement,

“It is reasonable to keep P2E games from getting age ratings under the current law because cash rewards in games can be considered prizes.”

The Game Committee has decided to cancel more than 15 blockchain games this year. The GMC calls these P2E games “speculative money-making games.”

However, the gaming industry strongly opposes the government's move and points to the global trend of growing P2E games. An official from the game industry said,

“If there is no legal basis for blockchain games, chaos will continue until the court’s ruling on the first related lawsuit, ‘Five Stars for Clayton’, is issued.”

Last month, Kim Gyu-Cheol, the chairman of the GMC, clarified that they aren’t banning blockchain games or the new technology such as NFT, rather just those using the P2E model.

“The game industry promotion act, unlike other laws promoting culture, is established to prevent speculation.”

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