South Korea Intensifies Crypto Exchange Regulations for Consumer Protection and Market Integrity
Summary:
South Korea's Financial Intelligence Unit (FIU) will heighten scrutiny over domestic crypto exchanges, starting 2023, to eliminate "unsuitable" platforms from the national economy. The FIU will also introduce a trading suspension system for suspicious transactions and expand the scope of these procedures into the crypto market. It will also assess the exchanges' anti-money laundering protocols, operational ability, and consumer protection measures before renewing their licenses. The move aligns with the upcoming enactment of the Virtual Asset User Protection legislation and the renewal registrations process.
The Financial Intelligence Unit (FIU) of South Korea recently declared stricter oversight of cryptocurrency exchanges within its jurisdiction, according to a February 12 report in the Korean Times. The FIU aims to drive "unsuitable" platforms out of the domestic market starting this year. An expansion of the screening protocol into the crypto-market to block unfit exchanges from infiltrating the national economy is also planned. It aims to develop a proactive suspension scheme for dubious transactions on platforms currently operating in South Korea, freezing transactions even in the pre-investigation stage. This strategy has been endorsed by the Financial Action Task Force, and 49 countries worldwide are considering its adoption.
Since 2021, the FIU has been granting licenses to virtual asset service providers in South Korea. As these three-year licenses begin to expire this year, businesses are seeking renewals. Before issuing new licenses, the FIU will assess the exchanges' capabilities in keeping money laundering at bay, their operational capacity, and consumer protection mechanisms. Exchanges failing this test will be denied registration. Ahead of the country's new consumer protection law specific to virtual assets that comes into effect in July, a rigorous review process is underway.
Rhee Yun-su, the commissioner of the FIU, has stated that seamless operations of the cryptocurrency industry will be guaranteed through agile implementation of necessary institutional improvements, given the impending enactment of the virtual asset consumer protection act and large-scale renewal registrations later this year.
The Virtual Asset User Protection legislation, a consolidated bill comprising 19 crypto-related laws, was sanctioned by the National Assembly on June 30, 2023. This legislation provides clear definitions of digital assets and imposes penalties for illicit trading activities including the utilization of undisclosed information, market manipulation, and using other unfair trading practices in crypto.
On February 7, it was reported by South Korean media that the FIU had initiated an investigation into the crypto exchange OKX over allegations of its unregistered operation in the country. The same day, another Korean regulator, the Financial Services Commission, announced life sentences for crypto criminals making more than $3.8 million from illegal activities.
Published At
2/13/2024 11:50:41 AM
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