September 24, 2022

Korean Regulator Taking Action Against 16 Crypto Exchanges

There are 16 cryptocurrency exchanges that have been targeted by the financial intelligence unit in South Korea because it appears they are operating illegally in the country.

The regulatory authority said that entities that are unregistered and operating illegally in South Korea would have to face five years of imprisonment, or fines of about KRW 50 million can be imposed.

VASPs under investigation

The top financial regulatory authority in South Korean is known as the Financial Services Commission (FSC) and its financial intelligence unit is called KoFIU.

On Thursday, the FSC announced that investigative authorities had been informed about KoFIU about 16 virtual asset service providers (VASPs) that had been operating illegally in the country.

As mentioned earlier, KoFIU is the financial intelligence unit (FIU) of South Korea and the top agency in the Asian nation that deals with matters of counter financing of terrorism (CFT) and anti-money laundering (AML).

The 16 crypto exchanges that have come under fire are Coinw, Digifinex, Phemex, Kucoin, XT.com, Bitglobal, Zoomex, BTCC, Poloniex, AAX, ZB.com, MEXC, BTCEX, Pionex and Coinex.

It should be noted that all 16 of these entities are based outside of South Korea and do not have a formal domestic presence.

The situation

According to the South Korean regulator, these crypto exchanges were found to be offering their crypto-focused services to domestic customers.

For instance, their websites are offered in the Korean language and they also host promotional events that are aimed at Korean clients.

In addition, they also offer a payment option, which supports the use of credit cards in South Korea in order to purchase crypto assets.

Last year on July 22nd, foreign-based crypto exchanges in South Korea had been informed by KoFIU that they need to register their entities with the authority in order to operate in the country.

However, it said that the 16 crypto exchanges aforementioned had not paid any heed to it and had continued to operate without registering.

The authority said that due to these illegal business activities, the exchanges could be fined up to KRW 50 million, or get sentenced for five years in prison.

Moreover, they could also be restricted for registering as a virtual asset service provider (VASP) in the South Korean market for a specific time period.

Financial authorities

The regulatory authority also noted that they would get in touch with the financial authorities of the jurisdictions where these exchanges are based.

Plus, they would also halt credit card processing domestically. Furthermore, they would no longer permit people to make transfers of virtual assets from or to these 16 crypto exchanges.

This is because administrative guidance has been issued by the authorities and transactions between registered and unregistered platforms have been suspended.

The regulator said that they also intend to take the measures necessary for ensuring that crypto service providers do not operate in South Korea without registration.

It said that they would continue monitoring unregistered activities for any illegal business activities and collaborate with relevant authorities.

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