The Financial Services Commission (FSC) in South Korea is investigating 16 Bitcoin exchanges for violating a financial law. The FSC claimed that these exchanges operate without reporting. Here are the details…
Bitcoin exchanges targeted in South Korea
According to the officials’ statements, these cryptocurrency exchanges actively conducted sales activities on their websites through attractive offers without notifying the South Korean government. On August 18, the Financial Intelligence Unit (FIU), operating under the FSC, accused these 16 exchanges of violating the law. This included some of the largest exchanges operating in the country such as KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, BTCEX, BTCC, DigiFinex, and Pionex.
According to the Special Law, any business entity associated with virtual assets must meet the regulatory requirements of the FIU. This includes obtaining information security management system (ISMS) certification. If not reported, a business can face up to 5 years in prison or fines not exceeding 50 million won. Also, the business cannot operate in the crypto industry for another five years. These rules apply to both domestic and foreign businesses.
The FSC noted that the exchanges violated the Private Financial Information Act (Special Act). Local media outlet News Korea stated that, under the Special Law, it is illegal for trading platforms to operate in the country without registering with the relevant authorities. According to the report, the Financial Intelligence Unit (FIU) reached out to crypto exchanges in July 2021, informing them that they must register and report their business to the government.
Exchanges can be penalized
Under South Korean rules, founders of virtual asset exchanges found guilty of violating the Special Act can face up to five years in prison. Additionally, guilty exchanges cannot be fined more than 50 million won ($37,854) for violating the rules. Also, founding trading platforms will not be able to register as domestic virtual asset businesses for the next five years. Specifically, the rules apply to domestic and foreign cryptocurrency exchanges serving Koreans. In order to prevent the exchanges from working any further, the FIU asked other relevant institutions to block access to the websites of trading platforms.
During its investigations, the FIU found that these crypto exchange services also allow crypto purchases using a credit card. However, under the Special Law, it is not allowed for exchanges that do not register. The FIU is now working with credit card providers to ensure they don’t allow any crypto purchases. The regulator also instructed them to suspend operations for unreported operators.
