South Korea Targets Unregistered Crypto Exchanges, Blocks Access

South Korean financial authorities have intensified their efforts to crack down on unregistered overseas crypto exchanges operating illegally within the country. The Financial Intelligence Unit (FIU) of the Financial Services Commission has initiated an investigation targeting several foreign platforms that have been providing services to Korean users without registering as Virtual Asset Service Providers (VASPs) under the Specific Financial Information Act.

The FIU has identified several exchanges, including BitMEX, KuCoin, CoinW, Bitunix, and KCEX, as part of its investigation. These platforms are accused of offering Korean-language websites, marketing efforts, and customer support targeting local investors, all without complying with Korea’s VASP registration requirements. Under current law, any entity involved in virtual asset trading, custody, or brokerage in South Korea must formally register with the FIU. Non-compliance is considered illegal and can result in criminal penalties and administrative sanctions.

In response to these findings, authorities are considering blocking access to these platforms as a potential enforcement measure. The FIU is in consultation with the Korea Communications Standards Commission (KCSC) to implement website blocks and further limit the exchanges’ ability to operate in the country. This is not the first time South Korea has taken action against unauthorized crypto firms. In 2022, the FIU requested the KCSC to block access to 16 unregistered foreign exchanges and worked with domestic credit card companies to prevent cryptocurrency-related transactions. These efforts led many exchanges to withdraw from the Korean market and halt new user registrations.

An FIU official stated that damage cases are being collected and inter-agency communication is being strengthened. “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,” the official said. “We are organizing damage cases and related data to strengthen communication between authorities, and we expect to see tangible measures taken within this year.”

Earlier this week, South Korean prosecutors launched a formal investigation into Bithumb, one of the country’s largest cryptocurrency exchanges, over allegations that company funds were misused to facilitate an apartment purchase for its former CEO. The Seoul Southern District Prosecutors’ Office executed a search and seizure operation at Bithumb’s headquarters. Authorities suspect that Bithumb provided a 3 billion Korean won (approximately $2.4 million) lease deposit for an apartment to its former CEO and current advisor, Kim Dae-sik.

This crackdown on unregistered overseas crypto exchanges and the investigation into Bithumb highlight South Korea’s commitment to regulating the cryptocurrency industry. The country aims to protect its investors and ensure that all virtual asset service providers comply with local laws and regulations. The FIU’s actions, along with the ongoing investigation into Bithumb, demonstrate the government’s resolve to enforce compliance and maintain the integrity of the financial system.