FSC widening probe on cryptocurrency exchanges

Financial Services Commission (FSC) Vice Chairman Kim Yong-beom arrives at the agency's headquarters in downtown Seoul, last week, to discuss an alleged accounting fraud case involving Samsung Biologics with FSC officials. Yonhap

By Kim Yoo-chul

The top financial regulator is teaming up with prosecutors to widen their ongoing probe into domestic cryptocurrency exchange operators with a senior Financial Services Commission (FSC) official calling on regulators worldwide to coordinate policies on crypto-assets

"Following a request by the Financial Supervisory Service (FSS) and the prosecution to address growing anti-money laundering compliance concerns and possible abuse of cryptocurrencies in money laundering and fraud, the FSC is looking into exchanges' corporate accounts opened in local banks," an official said Sunday.

The official said Bithumb appears to be among the primary targets of an expanded investigation, though he declined to elaborate.

While new FSS governor Yoon Suk-heun stated that he will look to ease regulations on domestic cryptocurrency trading, saying, "there are some positive aspects to cryptocurrencies"; the FSC is continuing its hard-line stance.

FSC regulates policies, while the FSS examines and supervises financial institutes under the former's supervision.

The official said collaboration with the FSS on cryptocurrency policies is part of efforts to find common ground, as inspections of financial issues have different scopes. "It's untrue that the FSC has a different that the FSS regarding cryptocurrencies."

UPbit, Korea's top cryptocurrency exchange, was raided and is now being investigated by police, leading to panic selling that eventually affected the global market. South Korea is the world's third-largest cryptocurrency market in terms of daily transactions.

"The FSC is collaborating with authorities in other countries. Our latest findings show that the domestic exchange faked its balance sheets and deceived investors. The FSC is checking UPbit's computer system with prosecutors and the FSS to audit the exchange's virtual currency holdings," said another official.

The U.S. Securities and Exchange Commission (SEC) has launched a probe into cryptocurrency business. It currently has sent an unknown number of subpoenas and information requests to advisers and technology companies active in the U.S. market.

FSC Vice Chairman Kim Yong-beom stated the agency doesn't oppose the idea that blockchain technology would alter physical banking and financial services. He said the FSC is weighing the benefits of cryptocurrencies being used as a payment tool.

"Regarding the unique nature of cryptocurrencies, each country has its own assessment. That means an international discussion and cooperation among regulators to come up with policies on crypto-assets is necessary. We are seeing a steady development of blockchain technology thanks to its greater accessibility and efficiency. Because this technology has the potential to shake up today's regulations on securities, regulators have to respond to such a looming challenge," he said.

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