S. Korea Tightens Grip on Crypto Firms as Renewal of Regulatory Approvals Loom
by Fintech News Hong Kong February 14, 2024The Korea Financial Intelligence Unit (KoFIU) announced plans to ramp up the scrutiny of cryptocurrency exchanges operating within the country.
Starting this year, exchanges that do not meet stringent regulatory standards will face expulsion from the market, according to The Korea Times.
This crackdown is part of a broader effort by financial authorities to safeguard investors and the financial system from the risks associated with unfit virtual asset service provider.
By expanding the scope of screening for new entrants into the cryptocurrency market, the authorities aim to prevent the proliferation of entities that could undermine the market’s stability.
Since the latter part of 2021, KoFIU has overseen the registration of numerous cryptocurrency exchanges in Korea, aiming to ensure compliance with legal and operational standards.
As the period for renewal of registrations for exchanges that were initially approved three years ago approaches in the second half of this year, KoFIU plans to conduct rigorous examinations to ensure these entities meet enhanced criteria.
These criteria include thorough anti-money laundering checks, operational efficiency in handling the Korean won market, and robust consumer protection practices.
Rhee Yun-su
Rhee Yun-su, the commissioner of KoFIU, emphasised the agency’s commitment to implementing the country’s inaugural virtual asset consumer protection law, slated to take effect in July.
“With the upcoming enactment of the virtual asset consumer protection act and the large-scale renewal registrations, we are committed to making the necessary institutional improvements to ensure the cryptocurrency industry operates smoothly.”
Additionally, in a bid to enhance the detection and prevention of financial crimes, the government is contemplating the introduction of a preemptive trading suspension mechanism.
This system, which is already in place in 49 countries, including Britain, Germany, and Finland, would allow for the suspension of suspicious transactions even before a formal investigation is launched.
The move follows recommendations from the Financial Action Task Force, a global entity dedicated to combating money laundering.
The announcement of these regulatory measures is part of KoFIU’s annual work plan, developed in consultation with the cryptocurrency industry and experts.
In a related move to clamp down on crypto-related crimes, South Korea has introduced severe penalties for illicit activities involving cryptocurrencies.
According to the nation’s Financial Services Commission (FSC), individuals profiting over 5 billion Korean won (US$3.76 million) from such activities may now face a maximum sentence of life in prison.
This comes as part of the preparations for the Virtual Asset User Protection Act, a new law enhancing consumer protection and prohibiting market manipulation, among other regulations.
Featured image credit: Edited from Freepik
