- Purpose of Inspection
- Focus on Selected Exchanges
- Comparison with Global Trends
South Korea has announced plans to inspect cryptocurrency exchanges to uncover illegal or unfair practices. This is the first inspection since stricter regulations under the Virtual Asset Users Protection Act were implemented in July.
Purpose of Inspection
The inspection aims to detect suspicious transactions and ensure that exchanges comply with rules for protecting virtual assets and maintaining proper transaction records. According to the Financial Supervisory Service (FSS), which is conducting the inspection: "The FSS will establish market order through stern punishment against illegal activities that may be identified in the process of its inspection, and will push for the revision of regulations if necessary by identifying the areas in the system where improvements are needed."
Focus on Selected Exchanges
Initially, the review will focus on two crypto exchanges dealing in the Korean won, flagged for "unusual cases" in previous evaluations. Under the new act, individuals who profit over 5 billion won ($3.7 million) through illegal virtual asset transactions can face penalties as severe as life imprisonment. In addition, three more crypto exchanges and one wallet provider will be inspected. The FSS also warned that other exchanges could be investigated if issues or complaints arise.
Comparison with Global Trends
South Korea's heightened scrutiny reflects a growing global trend. In Hong Kong, operating an unlicensed virtual asset trading platform became a criminal offense as of June 1. Some applicants have received initial approval but have yet to be fully licensed. In July, Coinbase's UK branch was fined £4.5 million by British regulators for breaching a voluntary agreement related to user onboarding.
This new phase of tightening oversight of cryptocurrency exchanges in South Korea echoes the global trend towards stricter regulation of the industry. Regulators aim to ensure transparency and investor safety, as well as to prevent illegal operations in the cryptocurrency markets.
