South Korea to Tighten Scrutiny on Crypto Exchanges, Expel Unfit Platforms from Market in 2024

South Korea to Tighten Scrutiny on Crypto Exchanges, Expel Unfit Platforms from Market in 2024

Crypto News – The South Korean Financial Intelligence Unit has made a public announcement regarding its decision to intensify scrutiny over cryptocurrency exchanges within the country. The FIU aims to expel platforms considered “unsuitable” from the local market, starting in 2024.

As reported by The Korea Times on February 12, the FIU plans to broaden the scope of screening procedures within the cryptocurrency market, aiming to prevent inadequate exchanges from infiltrating the national economy.

One of the key strategies outlined by the regulator involves implementing a preemptive trading suspension mechanism for transactions deemed suspicious on already operational platforms in South Korea. This system will freeze transactions during the pre-investigation phase, a move recommended by the Financial Action Task Force, with 49 countries worldwide also contemplating similar measures.

Since 2021, the FIU has been responsible for licensing virtual asset service providers in South Korea. With the expiration of the three-year terms for these licenses in 2024, companies are now in the process of seeking renewal. However, before granting new permits, the FIU will conduct thorough examinations of the Anti-Money Laundering infrastructure, operational capabilities, and consumer protection measures of these exchanges. Those failing to meet the criteria will be denied registration.

Ahead of the enactment of the virtual asset consumer protection act in the latter half of the year, authorities are conducting comprehensive assessments. Rhee Yun-su, the FIU commissioner, emphasized the importance of institutional enhancements to ensure the smooth 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. This unified bill defines digital assets and imposes penalties for illicit trading activities, including the use of undisclosed information, market manipulation, and other unfair trading practices in the cryptocurrency sphere.

Recent reports from South Korean media on February 7 indicate that the FIU is investigating the crypto exchange OKX for alleged unregistered operations in the country. Concurrently, the Financial Services Commission announced that individuals involved in crypto-related criminal activities generating over $3.8 million in illegal profits could face life imprisonment.