The action by the Korea Financial Intelligence Unit (FIU) against 16 foreign-based firms could lead to unregistered cryptocurrency exchanges operating in South Korea blocking their services.
The FIU has informed its investigative authority that 16 virtual asset service providers are doing business without the required registration. Major exchanges such as KuCoin, Poloniex and Phemex were listed along with 13 other exchanges that are set to be disrupted by the FIU.
All 16 exchanges allegedly engage in business activities targeted at domestic consumers by offering Korean-language websites, running promotional programs targeted to Korean consumers, and offering credit card payment options for cryptocurrency purchases. All these activities come under the Financial Transaction Reports Act.
The FIU has already taken action against unregistered exchanges by reporting violations of registration fees and intends to inform their counterparts in the respective countries that the business is conducted. Unregistered entities face up to five years in prison, a fine of ~$37,000, and a possible ban on future registration in the country.
RELATED: South Korea’s Small Crypto Exchanges Face Rising Regulatory Heat
The Korea Communications Commission and the Korea Communications Standard Commission have also been requested to block domestic access to the websites of the exchanges in question.
Credit card service providers have been requested to identify and block cryptocurrency purchases with credit cards. The FIU has also issued a requirement for registered exchanges in the country to suspend transactions in an attempt to prevent transfers from 16 unregistered companies to other platforms.
South Korea’s Financial Services Commission announced a July 2022 deadline for local and foreign-based, cryptocurrency-related businesses to register with the relevant authorities. September 24 is the due date for registration of companies before they are liable to face criminal prosecution and the potential fines and penalties mentioned earlier.
While the FIU targets unregistered exchanges, the FSC has vowed to expedite the review of 13 different cryptocurrencies-related bills under consideration of the National Assembly. Efforts are being made to legislate with a balanced approach to blockchain development, investor protection and market stability.
