- South Korea targets foreign crypto exchanges for non-compliance with the Specific Financial Information Act.
- The Financial Intelligence Unit is working to close unregistered exchanges offering services to Koreans.
- Only 31 crypto exchanges are officially registered in South Korea, down from 42 in the previous year.
The South Korean financial regulators have started going after the foreign crypto exchanges that operate in the country without meeting the regulatory requirement of the Specific Financial Information Act. As for now, many exchanges operate in South Korea and offer their services locally, which violate the established legal regulations. This is why the South Korean government intensifies its efforts to regulate cryptocurrencies and protect the country’s investors.
Crypto Exchange Licensing Requirements
According to a recent report, leading the initiative is the Financial Intelligence Unit (FIU) that is an independent entity empowered to collect and analyse information on money laundering in the country. Since there is still some of them that continue to offer their services to South Koreans, it is considering ways to effect their closure.
The issue is also being addressed by the KCSC (Korea Communications Standards Commission) in cooperation with the FIU. It emerged that any international crypto exchange that operates in South Korea is required to be licensed by the FIU. Non compliance is thus punishable by criminal laws in some jurisdictions or through administrative sanctions.
Some of the exchanges are under investigation owing to engaging with South Korean users. Some of the platforms that it pioneered include BitMEX, KuCoin, CoinW, Bitunix, and KCEX. All of these exchanges have maintained and hosted Korean-language websites and have offered marketing, customer services and support in the breach of the SFIA. The government is implementing these measures to bring all crypto trading enterprises in the country into the formal sector to be regulated adequately.
Impact of Regulatory Crackdown
The SFIA requires all entities that trade or manage cryptocurrencies, or engage in related assets custody, to register with the FIU. In most cases, unregistered platforms attract some significant legal repercussions. In 2022, the FIU accomplished its goal of lobbying the Korea Communications Standards Commission to black list 16 international platforms of which include KuCoin, MEXC and Poloniex. Consequently, many of the these unregistered platforms ceased operation in South Korea.
Currently, there are only 31 operating crypto exchanges in South Korea that are officially recognized by the government. This number decreased from 42 in the prior year. There are some exchanges that have been removed from the platform including GDAC, ProBit, Huobi Korea, and Bitrade. This means some of them did not meet the registration standards or did not extend their licenses; therefore, they are not legal platforms in the country.
This move demonstrates the growing trend of South Korea’s authorities and relevant institutions attempting to control the crypto industry. It also focused on the revelations of legal constraints in the financial sector regarding the laws that every country ought to adhere to strictly. The FIU’s actions are aimed at providing security to the South Korean investors and preserving the cryptocurrency market with its official currency within the country.
