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South Korea’s Financial Intelligence Unit (FIU) has announced its plans to intensify scrutiny over crypto exchanges operating within the country and expel platforms deemed “unsuitable” from the local market, starting in 2024.
According to a report by The Korea Times on February 12, the FIU aims to broaden the scope of screening procedures in the crypto market and prevent unfit exchanges from infiltrating the national economy.
The regulator intends to implement a preemptive trading suspension mechanism for suspicious transactions on platforms already functioning in South Korea. This system will freeze transactions even during the pre-investigation phase, a recommendation endorsed by the Financial Action Task Force, with 49 countries globally also considering its adoption.
Since 2021, the FIU has been granting licenses to virtual asset service providers in South Korea. With the three-year terms for these licenses set to expire in 2024, companies are seeking renewal. Before issuing new permits, the FIU will assess the Anti-Money Laundering infrastructure, operational capacity, and consumer protection measures of the exchanges. Those failing to meet the criteria will be denied registration.
Ahead of the implementation of the country’s virtual asset consumer protection act, scheduled for the latter half of the year, authorities are conducting thorough examinations. Rhee Yun-su, the commissioner of the FIU, stated:
“In preparation for the enactment of the virtual asset consumer protection act from the latter half of this year and the large-scale renewal registrations, KoFIU will agilely push forward with the necessary institutional improvements to ensure the seamless operation of the cryptocurrency industry.”
The Virtual Asset User Protection legislation, passed by the National Assembly on June 30, 2023, consolidates 19 crypto-related bills. It provides a unified framework defining digital assets and imposes penalties for illicit trading activities, including the use of undisclosed information, market manipulation, and other unfair trading practices in crypto.
On February 7, South Korean media reported that the FIU was investigating the crypto exchange OKX over allegations of unregistered operation in the country. The same day, the Financial Services Commission announced that crypto criminals involved in illegal profits exceeding $3.8 million could face up to life imprisonment.
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