South Korean authorities are reportedly looking into blocking crypto exchange platforms that may have operated without adhering to the requirements set by the country’s financial regulator.
On March 21, local media Hankyung reported that the Financial Intelligence Unit (FIU) of the Financial Services Commission is considering sanctions against crypto exchanges for allegedly operating in the country without reporting as an operator to the appropriate regulators.
South Korean financial authorities require crypto exchanges to report to regulators as virtual asset service providers (VASPs) under the country’s Specified Financial Information Act.
The FIU is investigating a list of exchanges and is conducting consultations with related agencies. The regulator is also considering sanctions, such as blocking access to the exchanges, as they begin to prepare countermeasures.
South Korean regulators eye crypto exchanges
The regulator will reportedly crackdown on exchanges allegedly providing services to South Koreans without the appropriate VASP reports. The exchanges in the FIU’s list reportedly provided marketing and customer support to Korean investors without going through the country’s compliance process.
Local media Hankyung mentioned that the crypto exchange KuCoin was on the list along with other crypto platforms. In a statement, a KuCoin representative told Cointelegraph:
“We are closely monitoring regulatory developments across all jurisdictions, including Korea. At KuCoin, we believe that compliance is essential for the healthy and sustainable growth of the crypto industry—this has always been our stance and will continue to guide us as we move forward. We remain committed to supporting the industry’s long-term development through proactive and responsible practices.”
Under the country’s laws, operators of crypto sales, storage, brokerage and management are required to report to the FIU. If exchanges don’t comply, their business will be considered illegal and subject to criminal penalties and administrative sanctions.
An FIU official said in the report that measures to block access to the exchanges included in the list are being reviewed. The official said the financial regulator is currently consulting with the Korea Communications Standards Commission, the regulator in charge of the internet, on how they can block access to the exchanges.
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South Korean exchanges face scrutiny
Apart from foreign exchanges, South Korean crypto exchanges are also facing scrutiny over suspicions and rumors of financial misconduct.
On March 20, prosecutors raided Bithumb following suspicions that its former CEO, Kim Dae-sik, embezzled company funds to purchase an apartment. The authorities suspect that the exchange and its executive may have violated some financial laws during the apartment purchase. However, Bithumb responded that Kim had already taken a loan to repay the funds.
In addition, rumors of intermediaries getting paid to list projects on Bithumb and Upbit surfaced. Citing anonymous sources, Wu Blockchain said projects claimed to have paid intermediaries millions to get listed on the exchanges.
Upbit responded, demanding the media outlet to disclose the list of digital asset projects that paid brokerage fees.
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