Key Takeaways
- FIU’s ‘2024 work plan’ aims to safeguard the Korean market from unauthorized exchanges and enhance anti-money laundering protocols
- FIU’s plan involves assessing exchanges for money laundering risks, user protection measures, and operational capabilities in the domestic market.
South Korea’s Financial Intelligence Unit (FIU) has unveiled plans to tighten oversight on crypto exchanges operating within the country, with measures including the expulsion of platforms deemed “unsuitable” from the local market.
This announcement, made public on February 12 as part of the FIU’s ‘2024 Work Plan,’ comes as existing virtual asset exchanges are due to renew their registrations in the second half of the year.
According to reports from local media outlets, the FIU intends to enhance scrutiny and inspection of crypto exchanges in preparation for implementing a comprehensive regulatory framework under the Virtual Asset User Protection Act, scheduled for July.
The FIU’s plan involves assessing exchanges for money laundering risks, user protection measures, and operational capabilities in the domestic market. Those failing to meet certain standards during inspections will be labeled ‘ineligible’ and expelled from the country.
In addition to expelling unsuitable exchanges, the FIU aims to prevent unfit platforms from entering the national economy by expanding the scope of screening targets. This includes broadening the review process to encompass major shareholders and implementing stricter disqualification criteria for those with a history of legal violations or poor social credit.
The FIU’s proposal also includes the introduction of a preemptive trading suspension system, recommended by the Financial Action Task Force (FATF), to detect and halt suspicious transactions during the pre-investigation phase. This system is aimed at bolstering efforts to combat financial crimes and ensure the integrity of the crypto market in South Korea.
The FIU’s initiative follows the passing of the Virtual Asset User Protection Act by South Korea’s National Assembly in July 2023, marking the country’s first legislative step towards establishing a regulatory framework for virtual assets. The legislation defines digital assets, imposes penalties for unfair transactions, and mandates specific requirements for service providers to enhance consumer protection and security measures.
Virtual assets have faced increased scrutiny in South Korea, particularly following investigations into domestic lawmakers’ crypto holdings and the collapse of Terraform Labs in 2022. Recently, South Korea’s financial authorities initiated probes into global crypto exchange OKX for potential illegal operations within the country.
