In a bid to protect investors and enforce local regulations, South Korean financial authorities are taking stern action against unregistered foreign cryptocurrency exchanges. The country’s financial intelligence unit, tasked with monitoring and curbing financial crimes, has also ordered Apple to pull 14 crypto exchange apps from the App Store. This follows a similar ban placed on the Google Play Store two weeks prior.
As a Result: Targeting Large-Scale Platforms
This directive, which seeks to limit the number of crypto platforms, including large-scale industry ones, is set to disproportionately affect a wide range of crypto platforms. Withdrawn exchanges include KuCoin, MEXC, Phemex, BitMart, CoinEx, Poloniex, BitTrue, Blofin, CoinW, BTCC, ZoomEX, and CoinCatch. These measures serve only to further exemplify how actively the Financial Services Commission (FSC) seeks to control these unregulated platforms.
Objective of Enforcement: Lack of International Authorization
What is clear is that the lack of compliance with South Korean digital regulation is the driving force behind these actions. The agency’s stance is that these platforms are operating without the necessary registration with FIU, thereby violating local statutes.
The South Korean government has enacted a law that requires all virtual asset service providers (VASPs) to register with the Financial Intelligence Unit (FIU) before catering to local users. This form of registration is extremely important to anti-money laundering (AML) compliance, one of the basic requirements of fighting financial crimes globally, especially within the context of cryptocurrency.
Defining the Scope: What Triggers Registration?
It applies to every foreign operator engaging in the following activities:
- Possessing a Korean language site.
- Processing payments in Korean won currency.
- Promoting the business to Korean clientele.
These conditions strive to encompass as many actions that can be deemed practicing business in South Korea as possible.
The Consequences: Legal Repercussions for Non-Compliance
In compliance with the developed regulations, the FIU has issued a dire warning to unregistered exchanges in regard to operating without any form of registration because of the legal implications of the given action. Failure to comply places these platforms at significant risk of harsh sanctions, including incarceration for five years and a monetary fine reaching up to 50 million Korean wons (around $36,000).
Protecting Investors: Safety and Transparency First
The actions of the FSC have always been to promote the protection of consumers. The unrestricted access of fraudulent exchanges onto app stores comes with unlimited potential for investor exposure to unregistered apps, scams, frauds, and many other forms of digital malfeasance. Restricting access to these unregistered exchanges helps mitigate these risks.
A Public List: Enabling Users to Register Exchanges
In an endeavor to further protect users, the regulator has created and published publicly accessible documents that list all officially registered exchanges. This enables users to identify and select platforms that have complied with regulatory requirements set in South Korea. The FSC implores users to actively withdraw their assets from unregistered platforms in order to prevent loss causing asset devaluation.
A Wider Approach: The Regulation of Offshore Exchanges
These measures aimed at unregistered exchanges are part of a broader, enduring framework for South Korean regulators to control offshore crypto platforms. In 2022 alone, the FSC claimed 16 exchanges and 6 more in 2023, showcasing his relentless desire to control these companies.
South Korea Remains Firm on Compliance with Crypto Regulations
The removal of unregistered crypto exchange applications from major app stores indicates South Korea’s position concerning the regulation of digital asset markets. Unregistered foreign operators will increasingly be monitored and subjected to additional sanctions because the authorities are enforcing local law and protecting investors. The regulatory outlook will continue shaping the landscape of cryptocurrency trading in South Korea.
