In a proactive move, South Korea’s Financial Supervisory Service [FSS] is intensifying its oversight of the crypto landscape by fortifying the existing Virtual Asset Users Protection Act, enacted earlier in 2023. FSS head Lee Bok-hyeon has announced plans to enforce updated regulations by January 2024, addressing the growing concerns of Korean citizens losing money in volatile foreign-issued cryptocurrencies, colloquially referred to as “burger coins.”
To address these challenges, the FSS head revealed in a press conference that his agency will conduct a comprehensive audit on October 17. The audit aims to establish rigorous standards for listing procedures, internal controls, and the issuance and distribution of virtual assets. Additionally, the FSS plans to implement a robust “virtual asset market supervision and inspection system” to enhance regulatory oversight.
Notably, the FSS is collaborating closely with the Digital Asset eXchange Association [DAXA], a consortium comprising major local crypto exchanges including Upbit, Bithumb, Coinone, Korbit, and Gopax. Lee emphasized the need for detailed regulations, indicating that the existing Virtual Asset Users Protection Act lacked specificity, especially concerning the agency’s authority and criminal liability for violations.
The FSS head stated, “If there is manipulation of distribution volume through staking or unfair disclosure, we will consult with DAXA,” highlighting the agency’s intent to ensure fair practices within the crypto market. He noted the absence of screening systems akin to those in the securities sector, necessitating collaborative efforts to fill regulatory gaps. This proactive approach coincides with South Korean regulators ramping up their vigilance on over-the-counter [OTC] crypto trading, aiming to combat illicit activities linked to digital assets.
South Korea Authorities Flag Down OTC Platforms
Recent reports underscore the heightened vigilance of the nation’s financial authorities concerning OTC crypto transactions, reflecting their commitment to maintaining the integrity and security of the crypto market. As previously reported, investigators revealed instances where OTC platforms served as channels for converting digital assets into Korean won.
A notable case involves the International Crimes Investigation Department of the Incheon District Prosecutors’ Office, which apprehended three individuals for engaging in illegal foreign exchange transactions between October 2021 and October 2022.
These arrested individuals were discovered in possession of digital currencies valued at $71 million, approximately 94 billion won, acquired from foreign OTC platforms under instructions from Libyan clients. They subsequently channeled these unlawfully acquired assets into South Korea, converting them into cash.