S. Korean regulator will expel ‘unfit’ crypto exchanges from the market starting this year

South Korea’s Financial Intelligence Unit (FIU) publicly announced the tightening of scrutiny over crypto exchanges in the country. As reported by the Korean Times on Feb. 12, the FIU will expel platforms deemed “unsuitable” from the local market starting this year. 

The FIU also intends to expand the scope of screening procedures into the crypto market and prevent unfit exchanges from entering the national economy.

The regulator intends to introduce a preemptive trading suspension system for suspicious transactions on platforms already operating in South Korea, which will freeze transactions even during the pre-investigation phase. The Financial Action Task Force recommended this move, and 49 countries globally are contemplating it.

The FIU has been licensing virtual asset service providers in South Korea since 2021. This year, the three-year terms for those licenses are running out, and companies apply for renewal. Before granting the new permits, the FIU will examine the exchanges’ anti-money laundering infrastructure, operational capacity and consumer protection measures. Those who fail the check will be refused registration.

Prior to the enactment of the country’s consumer protection law regarding virtual assets, which will take effect in July, a thorough examination is being conducted. Rhee Yun-su, the commissioner of the FIU, said:

“In preparation for the enactment of the virtual asset consumer protection act from the latter half of this year and the large-scale renewal registrations, KoFIU will agilely push forward with the necessary institutional improvements to ensure the seamless operation of the cryptocurrency industry.”

The Virtual Asset User Protection legislation was passed by the National Assembly on June 30, 2023. The legislation integrates 19 crypto-related bills, providing a unified bill defining digital assets and imposing penalties for illicit trading activities like using undisclosed information, market manipulation and other unfair trading practices in crypto.

On Feb. 7, South Korean media reported that the FIU was investigating the crypto exchange OKX due to allegations of unregistered operation in the country. The same day, another Korean regulator, the Financial Services Commission (FSC), announced that crypto criminals dealing with more than $3.8 million in illegal profits could face up to life in prison.

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2024-02-13 11:56