Authorities in South Korea are reportedly examining the possibility of blocking cryptocurrency exchange platforms that might have operated without complying with the nation’s financial regulations.
Local media reported that the Financial Intelligence Unit (FIU) within the Financial Services Commission is contemplating sanctions against crypto exchanges for allegedly conducting business in the country without proper registration as required by the regulatory authorities.
In accordance with the Specified Financial Information Act, South Korean regulations mandate that crypto exchanges register as virtual asset service providers (VASPs).
The FIU is currently investigating a range of exchanges and is collaborating with relevant agencies. Additionally, they are weighing potential sanctions, including restricting access to these exchanges, as they prepare to implement countermeasures.
### Exchanges Operating Without VASP Registration
The exchanges under scrutiny for allegedly offering services to South Koreans without the necessary VASP registration include BitMEX, KuCoin, CoinW, Bitunix, and KCEX. Reports indicate these exchanges provided marketing and customer support to Korean investors without proceeding through the local compliance process.
According to South Korean law, operators involved in crypto sales, storage, brokerage, and management must report to the FIU. Noncompliance could result in the business being deemed illegal, leading to criminal penalties and administrative sanctions.
An FIU representative mentioned that measures to restrict access to these exchanges are currently under review. The official also stated that the financial regulator is consulting with the Korea Communications Standards Commission, the body responsible for internet regulation, regarding methods to facilitate this access blockade.
### Increased Scrutiny on South Korean Exchanges
In addition to foreign exchanges, domestic cryptocurrency platforms are facing increasing pressure due to allegations of financial misconduct.
On March 20, prosecutors conducted a raid on Bithumb, suspecting that its former CEO, Kim Dae-sik, misappropriated company funds for personal real estate purchases. Authorities are investigating whether the exchange and its executive violated financial regulations during this transaction. Bithumb, however, has claimed that Kim had previously taken out a loan to rectify the situation.
Moreover, there are allegations of intermediaries receiving payments for listings on both Bithumb and Upbit. According to unnamed sources, it has been claimed that certain projects paid intermediaries substantial sums for their listings on these exchanges.
In response, Upbit has called for the media outlet to disclose the names of the digital asset projects reportedly involved in these brokerage fees.