- South Korea is implementing a new regulation that will require digital asset exchanges to register with the country’s financial regulator.
- Foreign crypto exchanges that market toward South Koreans would also need to comply.
- The move comes shortly after Chinese investors attempted cross-border arbitrage in the country.
Cryptocurrency exchanges operating in Korea will be required to register with the country’s regulator by late September this year.
South Korea cracks down on crypto service providers
The South Korean government stated that digital asset exchanges may face fines and punishment if they do not register with the financial regulator in the country by September 24.
The new regulation will apply to crypto-asset exchanges based in the country, as well as foreign exchanges that operate in Korean markets. So far, 27 firms have been warned by the Financial Services Commission (FSC) to stop serving citizens in the country without having being licensed.
The FSC added that the 27 cryptocurrency service providers are active in the country. Therefore, they must comply with the reporting requirements. These exchanges include those that are marketed toward Koreans, offering services in the country’s native language or payments that could be made with the Korean won.
Should any virtual asset service providers continue to operate in South Korea without proper registration, responsible parties would face up to five years of imprisonment or a fine of up to roughly $43,500.
The financial regulator warned cryptocurrency users to check whether the service provider has reporting requirements set in place. The FSC could take a step further to block access to certain websites that they believe are non-compliant crypto exchanges. The financial watchdog stated that they will take measures such as blocking website access to “prevent illegal business.”
South Korea has recently been cracking down on cryptocurrency exchanges with extensive restrictions set on cross-border remittances involving digital assets to present money laundering.
This comes after the reports of a suspicious increase in bank transactions from South Korea to China. The financial regulator believes that this was due to the emergence of the Kimchi Premium, and certain Chinese investors were looking for cross-border arbitrage opportunities.
According to Korea’s major banks, over $72 million in cash transactions were made in less than two weeks in April, which was recorded as an eightfold increase from the previous month.
Earlier this year, the financial watchdog implemented a new regulation that would require all digital asset exchanges to report suspicious transactions and keep relevant data or else face penalties.