16 Crypto Platforms Face Suspension in South Korea Amid Crackdown

The Korea Financial Intelligence Unit (KoFIU) said that it has alerted the investigating authority about the illegal business activities of 16 unregistered Virtual Asset Service Providers (VASPs) operating in South Korea. 

In a release published on August 18, the KOFIU listed some popular platforms for being in violation of the Reporting and Using Specified Financial Transaction Information Act while being domestically unregistered. The names of the violators include KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, BTCEX, BTCC, DigiFinex, and Pionex.

Crackdown on unregistered businesses

The regulator noted, “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.”

In addition, the agency also advised users to exercise “extra caution” while dealing with unregistered Virtual Asset Service Providers (VASPs) in order to avoid “incurring damages”.

The circular follows an earlier notification released on July 22, 2021, that instructed foreign-based VASPs to obtain a registration to carry business in the country. Now, KoFIU underlines that “the authorities plan to take necessary measures” on the back of the failure to do so.

The actions could include notifying the Financial Intelligence Units (FIUs) in each of the 16 unregistered VASPs’ home countries. Meanwhile, in South Korea, the agency states that a restriction on registration as a VASP may be imposed for a specific period along with a maximum five-year prison sentence or fine of KRW50 million (around $37,750) for illegal business activities.

Illegal VASPs to be ostracized as new regulations expected

While a suspension of operations is on the cards for these platforms, agencies will reportedly make it “impossible” to transfer crypto between registered and unregistered platforms.

The release also highlighted, “The KoFIU has requested the Korea Communications Commission and the Korea Communications Standards Commission to block domestic access to the websites of unregistered VASPs to prevent the use of virtual asset services provided by unregistered entities.”

In addition, credit card companies are also instructed to cut ties with these “illegal” platforms per the circular, as agencies continue to monitor activity within the sector.

That said, just last week, Singapore-based Crypto.com also acquired two local businesses in South Korea to function as a registered virtual asset service provider under the nation’s Electronic Financial Transaction Act.

Meanwhile, amid the crackdown, South Korea’s police force is also  experimenting with virtual asset seizure for other civil offenses. Be[In]Crypto also earlier cited reports that suggest that country’s financial regulators might also revisit its current legislation as the FSC launched a joint task force to establish a crypto framework.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.