South Korea Intensifies Scrutiny on Unregistered Crypto Exchanges
In a bid to regulate the burgeoning cryptocurrency market, South Korean financial regulators are considering imposing sanctions on several foreign-based crypto exchanges. The targets include well-known platforms such as BitMEX and KuCoin, accused of operating without official registration in South Korea.
Potential Sanctions on Overseas Crypto Platforms
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According to reports from Hangyung, the Financial Intelligence Unit (FIU) of South Korea’s Financial Services Commission (FSC) has flagged multiple international crypto exchanges for failing to register as Virtual Asset Service Providers (VASPs). This violation is particularly concerning as these exchanges allegedly cater to Korean customers through localized services and language support without obtaining the necessary licenses.
Regulatory Requirements and Implications
Under the Specified Financial Information Act, any exchange aiming to operate in South Korea must register with the FIU to obtain a VASP license. This legal requirement helps ensure the secure management, brokerage, and storage of cryptocurrencies. Non-compliance could lead to severe legal consequences, including criminal charges and administrative penalties.
Proactive Measures by the FIU
The FIU is proactively preparing to block access to these unregistered exchanges while consulting with relevant authorities. This follows a similar move in 2022, when the FIU urged the Korean National Security Agency to restrict access to 16 foreign exchanges, including MEX and Poloniex, for bypassing registration mandates.
Domestic Crypto Exchanges Under Scrutiny
Not only are foreign exchanges under the microscope, but South Korean platforms like Upbit and Bithumb are also embroiled in controversy. Allegations have surfaced claiming that intermediaries demanded exorbitant fees to list new projects on these exchanges.
Accusations of Unjust Listing Fees
Reports by Wu Blockchain suggest that intermediaries linked to Upbit’s shareholders demanded fees ranging from $2 million to $10 million to list tokens. These fees reportedly represented 3% to 5% of the entire token supply. Despite these accusations, Upbit has categorically denied engaging in such practices, emphasizing that all trading support procedures are managed internally without third-party involvement.
Bithumb Faces Additional Legal Challenges
Bithumb is under separate scrutiny, as the South Korean government recently raided its headquarters. This investigation centers on allegations against the exchange’s former CEO, Kim Dae-sik, for purportedly embezzling funds for personal use.
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