The South Korean Financial Intelligence Unit (FIU) has made a significant announcement regarding the imposition of tighter scrutiny over crypto exchanges in the country, with plans to expel platforms deemed "unsuitable" from the market beginning in 2024. This move is aimed at elevating standards within the crypto industry and enhancing consumer protection measures. The FIU's decision comes in response to a recommendation from the Financial Action Task Force (FATF), with 49 countries globally considering similar measures. This comprehensive article sheds light on the regulations and developments within the South Korean crypto market, including the licensing of virtual asset service providers, the enactment of the Virtual Asset Consumer Protection Act, and recent investigations into crypto exchanges.


In a report published by The Korea Times on February 12, it was revealed that the FIU intends to widen the scope of screening procedures in the crypto market to prevent unsuitable exchanges from entering the national economy. The plan also includes the introduction of a preemptive trading suspension system for suspicious transactions, freezing transactions even during the pre-investigation phase. With the three-year licenses for virtual asset service providers set to expire in 2024, the FIU is conducting thorough examinations of the anti-money laundering infrastructure, operational capacity, and consumer protection measures of the exchanges before granting new permits, taking into consideration the recommendations from the FATF.


Furthermore, preparations are underway for the enactment of the Virtual Asset Consumer Protection Act in the latter half of this year. Rhee Yun-su, the commissioner of the FIU, emphasized the agile advancement of necessary institutional improvements to ensure the seamless operation of the cryptocurrency industry. The legislation integrates 19 crypto-related bills, providing a unified bill defining digital assets and imposing penalties for illicit trading activities such as using undisclosed information, market manipulation, and other unfair trading practices in crypto. 


Looking at recent developments, the FIU has been investigating the crypto exchange OKX due to an alleged unregistered operation in South Korea, highlighting the rigorous approach taken by regulators. Additionally, the Financial Services Commission announced that crypto criminals dealing with more than $3.8 million in illegal profits could face maximum penalties, reinforcing the crackdown on illicit activities within the cryptocurrency space. These measures signify a concerted effort to foster a secure and compliant crypto ecosystem in South Korea.


(SAVANNAH FORTIS, COINTELEGRAPH, 2024)