South Korea’s financial sector regulator, the Financial Services Commission (FSC), plans to stop domestic access to foreign cryptocurrency exchanges that are not registered in the country. These trading platforms have been asked to obtain the proper licenses before September 24.
Otherwise, your websites will be instantly blocked. Also, users who deal in such exchanges without a license may face penalties.
Currency Exchanges on Watchdog’s Radar
The financial sector watchdog is believed to have received a request from its intelligence unit that the local websites of 16 foreign cryptocurrency exchanges should be blocked. A similar notice has been issued to other law enforcement agencies in the country, according to media reports.
The FSC could launch investigations into the 16 foreign cryptocurrency exchanges operating in the country without proper operating permission and report their violations to the nations where they are registered, according to the coverage.
The 16 foreign cryptocurrency exchanges on the list are KuCoin, MEXC, Phemex, ZB.com, Bitglobal, CoinW, XT.com, Bitrue, CoinEX, AAX, ZoomEX, BTCEX, BTCC, Poloniex, DigiFinex, and Pionex.
Requirements and Punishments
One of the requirements for foreign cryptocurrency platforms to operate in South Korea is to obtain a Korean Information Security Management System (ISMS) certification. Certification requires strict data maintenance related to anti-money laundering and KYC provisions.
They are also required to follow the guidelines of the Specific Financial Information Law to operate in the South Korean market. The Law prescribes up to five years in prison or 50 million won ($43,500) in fines for not operating without proper permission. An additional ban may also be imposed on the re-registration of these companies.
In a crackdown last year, nearly 60 cryptocurrency exchanges were forced to close for failing to meet these requirements. As of now, 35 of these companies are said to have licenses to operate in South Korea. These include the top five exchanges: Bithumb, Coinone, Upbit, Gopax, and Korbit, which account for more than 99% of the local market.
Crypto-friendly image of Korea
Earlier this month, CryptoCom obtained a virtual asset service provider license and registration under the Electronic Financial Transactions Act. These approvals became necessary for the Singapore-based crypto exchange after it acquired payment services provider and digital asset firm PnLink Co. and OK-BIT Co., respectively.
In May, President Yoon Suk-yeol, who is believed to be friendly to cryptocurrencies, took over the office. His administration has proposed deferring planned crypto taxes that would take effect from January 2023 to January 2025.
He has said that the crypto tax should come into force only after there is a proper market infrastructure for trading digital assets. One of the components of this infrastructure is crypto regulation, which is believed to be in the works and may launch next year.
Difficult time for regulators
However, regulators are having a hard time dealing with a market where cryptocurrency trading is legal, but there are no specific laws to regulate it.
In the latest issue, the FSC is reported to be investigating illegal overseas remittances linked to what is called Kimchi Premium, a trade to profit from the difference in crypto asset prices between domestic and foreign cryptocurrency exchanges.
These illegal transactions took place between January 2021 and June 2022 and are believed to be worth $6.5 billion.
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