South Korea is cracking down on cryptocurrency exchange activity within its borders.
South Korea Is Taking a Stance
South Korea, at one time, accounted for more than one quarter of the world’s bitcoin and crypto transactions, though it appears the country’s presence within the digital currency space has died down a bit over the last three years. Nevertheless, the nation is still looking to purge all foreign digital currency exchanges from its terrain as a means of ending illicit activity.
In a recent statement, the South Korean Financial Services Commission warned all exchanges on its turf to either do the right thing and register their operations with the agency or risk being shut down permanently. These companies have until late September to go through the appropriate registration processes. Those that fail to do so will be forced to shutter their doors for good. The organization says it has mailed notices to nearly 30 separate trading platforms.
The statement explained:
For foreign VASPs that continue to operate without registration beyond the September 24 deadline, the KOFIU will notify them of their illegal activities and take actions such as blocking access to their websites to inhibit their illegal business operations.
Regulators have stated that criminal charges could potentially be brought against all companies that remain open while unregistered. Granted these charges take precedence in court, exchange executives could also find themselves having to pay heavy fines and could even spend time in jail.
Crypto crime has been running rampant in the industry over the past several years. Given that much of the crypto space remains unregulated, several malicious actors have seen the space as a prime way to garner funds they did not earn. Several exchanges – including Mt. Gox and Coincheck, both of which were stationed in Japan – have fallen victim to digital predators, and have experienced losses that when combined, amount to several billion dollars.
South Korea itself has seen its fair share of crypto-related crime, such as with the popular exchange Bithumb last year. In late 2020, officials in the country seized the exchange after it was discovered that certain tokens were being sold on the company’s website prior to their registration. Thus, the exchange was engaged in illegal sales and regulators were forced to take quick action.
Problems Have Occurred in the Past
In addition, users of Bithumb were unable to access their accounts or funds in early 2019 after a hack on the exchange occurred. South Korean regulators then issued a new law that required all exchange users to utilize their legal names while registering with any digital currency trading platform so that they could be properly identified should anything suspicious occur.
While registration laws were initially put in place last April, these rules only applied to standard banks and traditional VASPs. They have since been upgraded to include crypto-related ventures.