South Korea’s Financial Services Commission (FSC) reported 16 foreign crypto exchanges to investigative agencies for violating the Specific Financial Information Act, news1 reported on August 18.
According to the report, the law prevents unregistered crypto exchanges from operating without a license, but the 16 firms have been providing crypto services for Koreans and hosting events targeting Koreans.
The affected exchanges include MEXC, KuCoin, CoinW, CoinEX, ZB.com, Bitglobal, Bitrue, Poloniex, BTCEX, Phemex, XT.com, Pionex, BTCC, DigiFinex, AAX, and ZoomEX.
The report revealed that the infraction was discovered by the Financial Information Analysis Institute arm of the FSC.
The regulators had informed the firms about their obligation to report their operations, but they failed to comply.
FSC wants KuCoin, Poloniex, and others blocked
The FSC wants to block these exchanges’ continued operation within its jurisdiction.
It has asked the Broadcast and Communications Commission and the Korea Communications Commission to block domestic access to their websites.
Meanwhile, the regulator wants to bar credit card companies from rendering their services to these firms.
The exchanges do not have an ISMS certificate
Officials described the exchanges as ill-equipped because they do not have the Information Security Management System (ISMS) certificate, which means their users risk having their personal information leaked.
Apart from that, the officials added that malicious actors could also use the exchanges to launder money.
Under the Act, an individual operating an unregistered and illegal exchange could be imprisoned for up to 5 years or fined 50 million won ($37,900).
The operator will also be unable to register as a domestic virtual asset operator for five years.
The law applies to both foreign and local exchanges operating within the country.
South Korea’s crypto regulations
South Korea has one of the most comprehensive legal frameworks for the crypto industry.
In 2021, the authorities mandated crypto firms to get the ISMS certification, leading to the exit of several crypto exchanges from the country.
However, 35 virtual assets providers could register locally –five of those exchanges, UpBit, Coinone, Gopax, Korbit, and Bithumb, are responsible for over 99% of the crypto transactions in the country.
Meanwhile, the recent collapse of the Terra ecosystem has led to increased emphasis on crypto regulation in the country.