- Under the new Virtual Asset Users Protection Act, the FSS will conduct inspections on crypto exchanges for illegal activities.
- The inspection includes checking for compliance with asset protection and transaction record-keeping rules.
South Korea’s Financial Supervisory Service (FSS) has announced that it will begin inspecting cryptocurrency exchanges to address concerns about unlawful transactions. The regulatory authority will examine two Korean won-based exchanges for “unusual cases” before expanding its inquiry to three more digital asset exchanges and one cryptocurrency wallet service.
This is the first inspection under the recently approved Virtual Asset User Protection Act, which imposes severe penalties, including life imprisonment, on crypto gamers who illegally gain more than 5 billion won ($3.7 million). According to Yonhap News, the FSS would target important exchanges including Upbit, Bithumb, Coinone, Gopax, and Korbit, as well as Coin Market Exchange and other custodians.
Focus on Compliance and Regulation
The FSS strives to identify and handle illegal or suspicious transactions in order to ensure regulatory compliance. The inspections will also look at the exchanges financial condition and internal controls, notably those related to cryptocurrency storage. Key areas of investigation include the suitability of management contracts with banks, the separation of user assets from exchange assets, and the sufficiency of insurance and reserve funds for potential accidents or hacks.
“The FSS will enforce market order through strict penalties against any illegal activities uncovered during inspections,” according to the authority. ”They will also push for regulatory revisions if necessary to improve the system.”
The FSS will initially concentrate on two Korean won-based cryptocurrency exchanges, noting unusual cases discovered during previous investigations. In total, four won-based exchanges operate in the country, with three other crypto exchanges and one wallet provider being investigated. If there are any complaints or inconsistencies, the inspection will be expanded to include other exchanges.
The examination will look for regulatory compliance, such as protecting virtual assets and keeping accurate records. The FSS stated again its commitment to establishing market order through tough enforcement, and it is willing to alter regulations if loopholes are detected.
This proactive stand indicates South Korea’s commitment to improving governance of the cryptocurrency industry as well as protecting investors from fraudulent activity.
