South Korean financial authorities are contemplating sanctions against multiple cryptocurrency exchanges that have not adhered to local regulations. Reports from Korea Economic Daily indicate that exchanges such as BitMEX, KuCoin, CoinW, Bitunix, and KCEX are facing scrutiny for their operations within the country.
S. Korea to Sanction Crypto Exchanges
The Financial Intelligence Unit (FIU) of South Korea’s Financial Services Commission has identified these overseas trading platforms as operating illegally due to their failure to register as Virtual Asset Service Providers (VASPs) under the Specific Financial Information Act.
According to the Special Financial Transactions Act, all entities involved in crypto trading, storage, and management within South Korea must formally report their activities to the FIU. Non-compliance could lead to significant criminal penalties and administrative sanctions, as such firms are deemed illegal businesses.
Moreover, these exchanges have been providing Korean-language websites while lacking adequate marketing and customer support targeted at South Korean investors. Consequently, the FIU is conducting an investigation into their operations to determine appropriate actions, including the potential blocking of access to these platforms.
“We are currently reviewing blocking access to unreported overseas exchanges that are providing services to domestic investors through consultation with the Korea Communications Standards Commission. We are organizing damage cases and related data to strengthen communication between authorities, and we expect to see tangible measures taken within this year,” stated an FIU official.
A Continuous Crackdown on Crypto Platforms
This recent move is part of an ongoing effort by South Korean authorities to regulate the cryptocurrency landscape. In September 2021, the FIU mandated the shutdown of over 60 exchanges that failed to comply with local anti-money laundering (AML) regulations and registration requirements.
At that time, only four trading platforms—Upbit, Bithumb, Coinone, and Korbit—remained operational, while about 28 others that obtained security certificates were able to provide limited services without won settlements.
In 2022, the FIU requested the Korea Communications Standards Commission to block access to 16 overseas exchanges that did not report their operations as VASPs. Additionally, the agency collaborated with local card companies to restrict crypto purchases and payment services associated with these platforms.
Earlier this year, the FIU disclosed a decline in registered crypto firms within South Korea, revealing only 31 remain, down 26% from 42 in 2024. With the ongoing crackdown, this number is likely to diminish even further.
This developing story underscores South Korea’s stringent regulatory environment concerning cryptocurrency exchanges and highlights the ongoing challenges faced by international platforms aiming to operate within the country’s borders.
For more details, read the full post on CryptoPotato.
