South Korea’s financial regulator, the Financial Supervisory Service (FSS), will reportedly begin inspecting virtual asset exchanges for any suspicious or illegal transactions.
The FSS will enforce market order with strict punishments for illegal activities found during inspections and will advocate for regulatory revisions if needed to address system deficiencies, a local news media reported, quoting the regulator.
In its inspection, the regulator will look for suspicious transactions and ensure that crypto exchanges and related companies comply with the regulations.
South Korea’s crypto regulation focused on investor protection
On July 19, South Korea’s “Virtual Asset User Protection Act” came into effect which lays out several ways to protect users investing in cryptocurrencies. This includes insuring against hacks and malicious attacks on user crypto assets and keeping customer assets separate from the exchange’s assets.
Related: Crypto platform resumes UK registrations after 10-month FCA compliance pause
Elaborating further on the monitoring virtual asset service providers (VASPs), South Korea’s Financial Services Commission (FSC) said:
“The FSS is authorized to inspect VASPs for compliance with their duties to protect users, and the FSC is authorized to bring sanctions against rule-breakers by making corrective orders, issuing suspension of business operation, imposing administrative fines, and so on.”
The top crypto exchanges in South Korea include Upbit, Bithumb and Coinone, among others. VASPs operating in South Korea are also required to maintain strict due diligence to prevent money laundering on their platforms and report any suspicious transactions to the regulator.
South Korea’s regulator lays out main objectives for crypto exchanges.
Source: Financial Services Commission
In South Korea, cryptocurrencies like Bitcoin (BTC) are governed by specific anti-money laundering and securities regulations enforced by the Financial Securities Commission. Regulations for reporting by crypto service providers are primarily based on guidelines rather than laws in South Korea.
Regulation across jurisdictions gain traction
Alongside South Korea, several jurisdictions across the world are increasing scrutiny of digital asset trading platforms in order to protect crypto assets.
In Hong Kong, operating an unlicensed virtual asset trading platform became a criminal offense as of June 1. Some applicants received initial approvals from the city’s regulator but are yet to be fully licensed.
In July, Coinbase’s United Kingdom arm was fined $4.5 million by a British regulator for breaching a voluntary agreement related to user onboarding.