Korea to expel unfit cryptocurrency exchanges

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Starting this year, cryptocurrency exchanges that are deemed unsuitable, due to failing to meet stringent standards, will be expelled from the marketplace, as financial authorities plan to strengthen scrutiny and inspection of them, the Korea Financial Intelligence Unit (KoFIU) said Monday.

At the same time, the financial authorities will attempt to block the entry of unfit virtual business operators into the marketplace by expanding the scope of screening targets when a new business aims to advance into the cryptocurrency market.

The government is also considering adopting a preemptive trading suspension system for suspicious transactions, even at a pre-investigation stage, to swiftly prevent a criminal act. The system is being implemented in 49 countries, including Britain, Germany, and Finland, as recommended by the Financial Action Task Force, an international anti-money laundering organization.

These are some of the key policy directions and measures that will be implemented throughout this year by KoFIU, as the agency announced its annual work plan on Monday. The plans were drawn up after closely consulting with the cryptocurrency industry and experts at its policy advisory committees.

The office of the Korea Financial Intelligence Unit, located in central Seoul / Yonhap

Since the fall of 2021, KoFIU has been managing the official registration of dozens of coin exchanges that operate in Korea.

As cryptocurrency exchanges that gained government recognition three years ago are slated to renew their registrations during the second half of this year, KoFIU plans to conduct thorough examinations during the first half of this year.

After closely looking into the anti-money laundering inspections of coin exchanges, operational capacity in the Korean won market and consumer protection measures, the financial authorities are planning to expel those that fail to meet the strengthened standards.

The commissioner of KoFiu said that the stringent inspections regarding the cryptocurrency exchanges are to ensure the smooth implementation of the country's first protection law on virtual asset consumers, which will take effect in July.

"In preparation for the enactment of the virtual asset consumer protection act from the latter half of this year and the large-scale renewal registrations, KoFIU will agilely push forward with the necessary institutional improvements to ensure the seamless operation of the cryptocurrency industry," Rhee Yun-su, the commissioner at the intelligence unit, said.