South Korean Authorities Are Reportedly Looking Into Blocking Crypto Exchanges Operating Without Licenses

South Korean authorities are reportedly looking into blocking crypto exchange platforms that may have operated without adhering to the requirements

South Korean financial authorities are reportedly looking to block crypto exchange platforms that may have operated without adhering to the requirements set by the country’s financial regulator.

On March 21, local media Hankyung reported that the Financial Intelligence Unit (FIU) of the Financial Services Commission is considering sanctions against crypto exchanges for allegedly operating in the country without reporting as an operator to the appropriate regulators.

South Korean financial authorities require crypto exchanges to report to regulators as virtual asset service providers (VASPs) under the country’s Specified Financial Information Act.

The FIU is investigating a list of exchanges and is conducting consultations with related agencies. The regulator is also considering sanctions, such as blocking access to the exchanges, as they begin to prepare countermeasures.

Exchanges operated without VASP reports

The list of exchanges that have allegedly provided services to South Koreans without the appropriate VASP reports includes BitMEX, KuCoin, CoinW, Bitunix and KCEX. The exchanges reportedly provided marketing and customer support to Korean investors without going through the country’s compliance process.

According to the report, the exchanges applied to register as VASP but had yet to complete the process. They reportedly advised users to fund their accounts in Korean won through local bank accounts and provided customer support in Korean.

However, the report adds that the exchanges’ activities may still be deemed illegal despite offering services to South Koreans for a long time.

Under the country’s laws, operators of crypto sales, storage, brokerage and management are required to report to the FIU. If exchanges don’t comply, their business will be considered illegal and subject to criminal penalties and administrative sanctions.

An FIU official said in the report that measures to block access to the exchanges included in the list are being reviewed. The official said the financial regulator is currently consulting with the Korea Communications Standards Commission, the regulator in charge of the internet, on how they can block access to the exchanges.

Related: Wemix denies cover-up amid delayed $6.2M bridge hack announcement

South Korean exchanges face scrutiny

Apart from foreign exchanges, South Korean crypto exchanges are also facing scrutiny over suspicions and rumors of financial misconduct.

On March 20, prosecutors raided Bithumb following suspicions that its former CEO, Kim Dae-sik, embezzled company funds to purchase an apartment. The authorities suspect that the exchange and its executive may have violated some financial laws during the apartment purchase.

However, Bithumb responded that Kim had already taken a loan to repay the funds. The exchange added that it is fully cooperating with the investigation and hopes for a swift resolution of the case.

In addition, rumors of intermediaries getting paid to list projects on Bithumb and Upbit have surfaced. Citing anonymous sources, Wu Blockchain said projects claimed to have paid intermediaries millions to get listed on the exchanges.

According to the report, projects paid $15 million to intermediary A to get listed on Bithumb and $20 million to intermediary B to get listed on Upbit. The report also noted that the projects applied to be listed on the exchanges in 2022.

Upbit responded, demanding the media outlet to disclose the list of digital asset projects that paid brokerage fees.

The exchange stated that it has no projects that were listed through an intermediary and that it only communicates directly with the applicant regarding listing. It added that it will take strong legal action against the rumors and reports about projects paying for listing.