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December 4, 2023

South Korea Intensifies Scrutiny on Unlicensed Crypto Exchanges

14min

South Korean financial authorities have intensified their regulatory oversight of the cryptocurrency sector by soliciting public reports on unlicensed crypto exchanges. This move underscores the nation’s commitment to ensuring compliance and transparency in the rapidly evolving digital asset landscape.

Collaborative Effort by DAXA and FIU

The initiative, announced on December 4, is a collaborative effort between the Digital Asset Exchange Association (DAXA) and the Financial Intelligence Unit (FIU) of South Korea. DAXA, which includes major virtual asset exchanges like Upbit, Bithumb, Coinone, Korbit, and Gopax, plays a pivotal role in this regulatory push.

Aim of the Reporting Initiative

The primary aim of this initiative is to identify domestic and foreign virtual asset business operators that are targeting Korean citizens without adhering to Article 7 of the Specific Financial Information Act. This article mandates necessary regulatory compliance for operating crypto exchanges in the country.

Process of Reporting and Review

Individuals are encouraged to report any suspicious or unlicensed crypto exchange activities through DAXA’s dedicated tip email address. Reports should include comprehensive details about the business, reasons for suspicion, and evidence of undeclared activities. DAXA will initially review these reports before forwarding them to the FIU for further action.

Potential Consequences for Non-Compliance

DAXA has indicated that the FIU will take necessary measures, including notifying investigative agencies, against operators found to be engaging in undeclared business activities. This stance reflects South Korea’s stringent approach to regulating the crypto industry.

South Korea's Growing Crypto Regulation

The call for reports is part of South Korea's broader strategy to enhance its crypto regulatory framework. Recent initiatives include the Democratic Party’s mandate for parliamentary candidates to disclose crypto holdings and the Financial Supervisory Service’s preparations for supplementary regulations under the Virtual Asset Users Protection Act.

Anticipated Regulatory Developments

The new regulations, complementing the Virtual Asset Users Protection Act, are expected to be in place by January 2024. Additionally, South Korea's central bank plans to engage 100,000 citizens to test its forthcoming central bank digital currency (CBDC) in 2024, further indicating the country's proactive stance in the crypto sector.

South Korea's latest initiative to solicit reports on unlicensed crypto exchanges marks a significant step in the country’s efforts to create a safer, more transparent, and compliant digital asset environment. By involving the public in identifying non-compliant operators, the authorities are demonstrating their commitment to protect investors and maintain the integrity of the crypto market in South Korea.

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