Seoul Cracks Down on Crypto Industry: To Close Non-compliant Exchanges

South Korea's financial authorities, led by the Korea Financial Intelligence Unit (KoFIU), are planning to implement stringent measures targeting cryptocurrency exchanges. Exchanges failing to meet the stringent standards will face expulsion from the marketplace, according to a report by the KoreaTimes.

Authorities will expand the scope of evaluation to block the entry of unfit virtual business operators into the Korean cryptocurrency market. This proactive approach aims to maintain market integrity and protect investors.

Safeguarding the Cryptocurrency Industry

The Korean government is considering suspension of suspicious transactions, even at a pre-investigation stage. This move aligns with recommendations from the Financial Action Task Force, a global anti-money laundering organization.

KoFIU's annual work plan outlined key policy directions and measures aimed at safeguarding the cryptocurrency industry. Plans have been devised in consultation with industry experts and stakeholders. KoFIU will thoroughly examine cryptocurrency exchanges, focusing on anti-money laundering measures, operational capacity, and consumer protection. Exchanges facing scrutiny include those expecting to renew their licenses later in the year.

Stringent inspections align with the impending enactment of Korea's first protection law on virtual asset consumers, effective July. Commissioner Rhee Yun-su emphasized the importance of institutional improvements to ensure seamless industry operation.

South Korea's Virtual Asset Regulations

Recently, The South Korean Financial Services Commission (FSC) proposed changes to its reporting requirements for virtual asset service providers targeting the employment of executives. The proposed amendment mandates regulatory approval for executives joining crypto firms, giving the FSC authority over personnel changes. This step will facilitate effective regulation of the industry and affect the renewal of VASP licenses.

By requiring regulatory vetting for executives joining crypto firms, the FSC aims to ensure greater accountability and transparency in personnel appointments. The regulator has the authority to suspend licenses if any investigations into company personnel are ongoing.

Besides that, South Korea's financial authorities are taking proactive measures. The proposed regulations restrict transactions involving crypto mixers by virtual asset business operators, mitigating the potential for illicit financial activities.

Last year, the FSC banned on using credit cards to purchase cryptocurrencies in South Korea. By restricting credit card payments on overseas virtual asset exchanges, the Korean government aims to curb money laundering and speculative activities.