South Korean regulator unveils plan to inspect cryptocurrency exchanges for illegal practices

South Korea’s Financial Supervisory Service (FSS) announcement The U.S. Cryptocurrency Regulatory Agency announced Tuesday that it will begin inspecting cryptocurrency exchanges for illegal or unfair practices, the first inspection since the new Virtual Asset User Protection Act went into effect in July.

It looks for signs of money laundering and checks whether exchanges are complying with new rules designed to protect virtual assets and record transactions. FSSThey plan to:
“Maintain market order by ensuring strict penalties for any illegal activity discovered during inspection and advocate for change where possible by identifying areas of concern.”

The review will first focus on two cryptocurrency exchanges that operate in KRW (Korean won) and were identified as having “anomalies” in previous inspections. The new law also provides for harsher penalties for those involved in illicit activities related to virtual assets when they earn more than 5 billion won (about $3.7 million); such individuals could be sentenced to life imprisonment.

In addition to the first two exchanges, three other exchanges and a wallet provider will also be monitored. They have also threatened to investigate other exchanges if any issues or complaints are reported.

South Korea Joins Global Trend With Stricter Cryptocurrency Regulations

Virtual Asset User Protection Act The July 19 law aims to protect investors who trade virtual currencies by requiring insurance against fraud and cyberattacks and insisting that customer funds be segregated from the exchange’s own funds. The FSS has the power to conduct on-site inspections inspections Virtual Asset Service Providers (VASPs) for compliance with user protection measures. The organization known as the Financial Services Commission (FSC) has the power to correct orders, halt operations and impose fines on those found to have violated the rules.

According to South Korean regulations and AML regulations, major South Korean cryptocurrency exchanges such as Upbit, Bithumb, and Coinone must take precautions and report suspicious transactions. Currently, Bitcoin (BTC) and other cryptocurrencies are regulated under AML and securities, while the reporting rules for a crypto service provider in South Korea are based on guidelines and not standard laws.

South Korea’s increasing surveillance can be attributed to these reasons, although it is part of a similar trend seen in other countries. For example, launching a virtual asset trading business without a license became illegal in Hong Kong from June 1.