South Korean Financial Supervisory Service (FSS) announced on Tuesday that it will start inspecting cryptocurrency exchanges to uncover illegal or unfair practices. This is the first inspection since the new Virtual Asset Users Protection Act came into effect in July.
It looks for signs of money laundering and checks if new rules designed to safeguard virtual assets and record transactions are being complied with by the exchanges. According to the FSS, they plan to:
“Maintain market order by ensuring strict penalties for any unlawful activities discovered during the inspection, and advocate for change where possible by identifying areas of concern. ”
The review will start with two particular crypto exchanges that operate in KRW (Korean won) and which were previously found to have had ‘abnormalities’ in previous screenings. The new law also mentions heavier penalties for individuals involved in virtual asset illicit activities where they gain more than 5 billion won (approximately $3.7 million); such individuals may receive life imprisonment.
Along with the first two exchanges, three more exchanges and one wallet provider will also be checked. They have also threatened that they might investigate other exchanges as well if any problem or complaint is reported.
South Korea Joins Global Trend with Tighter Crypto Regulations
The Virtual Asset User Protection Act of July 19 seeks to protect investors who trade in virtual currencies by demanding insurance against fraud and cyberattacks as well as insisting that the customers’ funds be segregated from the exchange’s proprietary funds. The FSS has the power to conduct on-site inspections of Virtual Asset Service Providers (VASPs) for compliance with user protection measures. The organization known as the Financial Services Commission (FSC) has the authority to correct orders, halt operations, and fine those who have violated the rules.
According to South Korean regulations, and AML regulations, top South Korean cryptocurrency exchanges such as Upbit, Bithumb, and Coinone, have to precautions and report suspicious transactions. Currently, Bitcoin (BTC) and other cryptocurrencies are being regulated for AML and securities, while reporting rules of a crypto service provider in South Korea are based on guidelines and not standard laws.
South Korea’s rising scrutiny can be attributed to these reasons, albeit being in tune with a similar trend me observable in other countries. For instance, starting an unlicensed virtual asset trading was made unlawful in Hong Kong from June 1.
