South Korea to Intensify Scrutiny of Virtual Asset Exchanges
South Korea is planning to increase its scrutiny of virtual asset exchanges and take action against platforms that do not meet regulatory standards. The Financial Intelligence Unit (FIU) has announced a “2024 Work Plan” that involves consultations with the Policy Advisory Committee to gather expert opinions. The goal is to protect the Korean won market from unauthorized exchanges and improve anti-money laundering protocols by identifying and removing non-compliant operators. Lawyers and accountants will be involved in supporting these efforts.
Two-Phase Inspection Process
The FIU’s plan includes a two-phase inspection process. In the first half of 2024, an initial assessment of money laundering risks and market functionality will be conducted. This will be followed by a more thorough investigation in the latter half, specifically targeting virtual asset operators who fail to comply with regulatory standards. Major shareholders will also be evaluated, and stricter disqualification criteria will be applied to those with a history of legal violations or poor social credit.
Commitment to International Best Practices
The FIU’s approach aligns with the guidelines set by the Financial Action Task Force (FATF), demonstrating a commitment to international best practices. This includes preempting and halting suspicious transactions during investigations. South Korea is a significant player in the global cryptocurrency market, hosting major exchanges and accounting for a substantial portion of global crypto trading.
Tighter Regulations on Crypto Firms
Regulatory measures in South Korea are becoming stricter, with new rules targeting crypto firms for allegations of fraud, embezzlement, and trust violations. These rules will come into effect on July 19. Last year’s legislative proposals paved the way for severe penalties for market manipulation, including significant fines and the possibility of life sentences for major infractions.
Virtual Asset User Protection Act
The Virtual Asset User Protection Act, as it is known, prohibits market manipulation, illicit trading, and the exploitation of non-public information. It introduces life imprisonment as a potential penalty for generating illegal profits over 5 billion won. The act also requires virtual asset exchanges to hold user funds through banks and store the majority of users’ digital assets offline to enhance security and reliability.
Mandate for Public Officials
Following the Coin Gate scandal, high-ranking public officials are now required to disclose their cryptocurrency holdings. This measure aims to improve transparency and accountability in response to concerns about insider trading within the political sphere.
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