South Korea cracks down on unlicensed foreign crypto businesses

Financial Services Commission also creates a digital assets task force


South Korea's Financial Intelligence Unit (KoFIU) said on Thursday it has identified 16 foreign crypto businesses it will investigate for operating unregistered.

"The 16 foreign-based Virtual Asset Service Providers (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," said the Financial Services Commission (FSC).

The companies include KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, BTCEX, BTCC, DigiFinex, and Pionex.

Foreign-based cryptocurrency businesses were warned in July 2021 about South Korea's legal requirement to register. The commission says it plans to take "necessary measures," which include notifying their respective countries about the violations. The crime also carries penalties of up to five years in prison, a maximum $37,750 fine, and a temporary ban on domestic operations.

"Unregistered VASPs lack registration qualifications such as the certification for information security management system (ISMS) which leaves them vulnerable to risks of personal information breach and hacking," said the commission.

"Moreover, unregistered entities are outside the purview of management and supervision for AML activities which leaves them prone to be used a venue for money laundering."

The KoFIU urged consumers to exercise caution when engaging with crypto to avoid incurring damages themselves via transactions with unregistered providers.

The commission also announced this week it would engage in a private-public joint task force on digital assets in the hope of maintaining consumer protection and financial stability while co-existing with new technology like the blockchain.

The FSC said the government, private sector experts, and other institutions in the task force will seek government wide collaboration for legislative efforts.

The task force is set to tackle digital asset legal characteristics and rights relationships, response to related crimes, financial stability, central bank digital currency, tax issues, blockchain promotion, and regulatory frameworks for issuance and distribution markets. ®

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