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Home Cryptocurrency

Regulatory Shake-Up: South Korea to Expel Inadequate Crypto Exchanges in 2024

Minseo Park by Minseo Park
PUBLISHED: February 13, 2024 UPDATED: February 13, 2024
in Cryptocurrency, South Korea, Tech Industry
0
Regulatory Shake-Up: South Korea to Expel Inadequate Crypto Exchanges in 2024

South Korea’s Financial Intelligence Unit (FIU) has announced plans to tighten oversight of cryptocurrency exchanges, aiming to expel platforms considered “unsuitable” from the domestic market starting this year. The move comes amidst growing concerns over illicit activities and the need for enhanced investor protection in the cryptocurrency sector.

The Korea Financial Intelligence Unit (KoFIU) has outlined a comprehensive strategy to strengthen supervision of the crypto industry, which includes measures to enforce stringent operational standards and remove exchanges that fail to meet regulatory requirements, as reported by local media on February 12.

The Financial Intelligence Unit (FIU) of South Korea is set to enhance oversight of virtual asset exchanges by introducing a preemptive trading suspension system for suspicious transactions. This system, recommended by the Financial Action Task Force and under consideration by 49 countries worldwide, will freeze transactions even during the pre-investigation phase, aiming to disrupt illicit activities associated with cryptocurrencies.

The initiative is part of the FIU’s strategy for 2024, developed in collaboration with industry stakeholders and policy advisors. 

As the three-year licensing terms for virtual asset service providers in South Korea expire in 2024, the Financial Intelligence Unit (FIU) is poised to intensify its scrutiny of crypto exchanges seeking license renewal. The FIU will evaluate exchanges’ Anti-Money Laundering infrastructure, operational capacity, and consumer protection measures before granting new permits, with non-compliant exchanges facing refusal of registration.

The crackdown on crypto exchanges deemed unsuitable aims to mitigate risks to investors and preserve the integrity of the financial system. The FIU plans to broaden criteria for market entry to prevent the entry of unfit virtual business operators. This includes implementing a preemptive trading suspension system for suspicious transactions, aligning with practices recommended by the Financial Action Task Force (FATF) to combat financial crimes and ensure a safer trading environment for cryptocurrency users in South Korea.

The passing of the Virtual Asset User Protection legislation by South Korea’s National Assembly on June 30, 2023, represents a significant milestone in the country’s efforts to regulate the cryptocurrency industry. The legislation consolidates 19 crypto-related bills into a unified framework, defining digital assets and imposing penalties for illicit trading activities such as market manipulation and insider trading.

The Financial Intelligence Unit’s investigation into the crypto exchange OKX for alleged unregistered operations, coupled with the Financial Services Commission’s announcement of stringent penalties for crypto criminals, highlights the authorities’ determination to uphold regulatory standards and protect investors in the burgeoning digital asset market.


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Tags: Crypto platformscryptocurrencySouth Korea

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