The Financial Services Commission (FSC) has announced plans to take action against 16 foreign digital assets exchanges operating in South Korea without proper registration.
In a press release, the FSC stated that the exchanges were brought to its notice by its sub-unit responsible for overseeing the registration of digital assets exchanges—the Korea Financial Intelligence Unit (FIU).
The exchanges that were named are KuCoin, Poloniex, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, BTCEX, BTCC, DigiFinex, and Pionex.
“The 16 foreign-based VASPs were found to have been engaged in business activities targeting domestic consumers by offering Korean-language websites, having promotional events targeting Korean consumers, and providing a payment option that supports the purchase of virtual assets using credit cards,” the notice read.
In light of this, the FSC says it has taken regulatory actions against the firms. For one, the FIU has informed South Korea’s investigative authority of its activities. The financial investigation units of the home countries of the exchanges have also been informed about their violations.
FIU has also requested for South Korea’s telecom regulators to block domestic access to the exchanges’ websites and credit card companies to block their payment services. Registered exchanges have also been directed to block all transactions with the unregistered entities.
Meanwhile, consumers have also been cautioned against using these exchanges and to always check if the exchanges they transact with are registered. Unregistered exchanges have increased risks of personal information breaches, hacking, and involvement in money laundering.
South Korea tightening digital asset regulatory scrutiny
The FIU has been at the center of South Korea’s toughening digital asset scrutiny that began last year. The agency was created in September 2021 to look after digital assets exchanges.
FIU registered a total of 29 digital asset exchanges that have met the requirements of the Act on Reporting and Using Specified Financial Transaction Information as of December 2021. This is out of 42 exchanges that applied for licenses to operate in the country.
The FIU registered exchanges have not been exempt from increased regulatory scrutiny. In July, prosecutors raided seven local exchanges concerning investigations into the Terra ecosystem collapse.
However, the increased regulatory scrutiny has not stopped the growth of the South Korean digital assets market. In a survey earlier this year, FIU found that in 2021 South Korean digital assets transactions hit $46 billion, with $2.8 billion recorded as profits made by investors.
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