Cryptocurrency exchanges that fail to meet South Korea’s stringent operating standards will be expelled from the crypto market, the country’s financial intelligence agency has said. The Financial Intelligence Unit explained that its annual work plan incorporates the insights of cryptocurrency experts serving on its advisory committees.
South Korea’s Financial Intelligence Unit (FIU) announced on February 12 that cryptocurrency exchanges that fail to meet its enhanced standards will be expelled from the country’s cryptoasset market. This also applies to digital asset companies trying to enter the South Korean cryptocurrency market.
Additionally, the South Korean government is reportedly considering implementing a trading system that would automatically stop suspicious transactions even before launching an investigation. This system, recommended by the Financial Action Task Force (FATF), is already in use in 49 countries, including Britain, Finland and Germany.
South Korea Reviewing All Crypto Transactions
The Financial Intelligence Unit (FIU) has reported a massive increase in the number of suspicious crypto transactions in 2023 compared to the previous year.
“Consequently, the number of suspicious transaction reports to the FIU by virtual asset service providers increased by approximately 49% compared to the previous year.”
Additionally, the FIU indicates that it has increased cooperation and communication with other law enforcement agencies. This is an effort to strengthen its position in the fight against illicit cryptocurrency transactions.
Data from Statista indicates that South Korea is projected to achieve annual revenue of $2.2 billion in the cryptocurrency market by 2027.
South Korea Will Implement System to Identify Suspicious Transactions
According to a report by The Korean Times, FIU’s new strategies for the cryptocurrency industry are detailed in the annual work plan, presented on February 12. The work plan is said to incorporate the insights of cryptocurrency experts who are part of its advisory committees.
Commenting on the agency’s plan to hold cryptocurrency exchanges to higher operating standards, FIU Commissioner Rhee Yun-su had this to say:
“In preparation for the enactment of the virtual assets consumer protection law starting in the second half of this year and large-scale registration renewals, the KoFIU will nimbly move forward with the necessary institutional improvements to ensure the smooth operation of the cryptocurrency industry,” Rhee Yun-su, the commissioner in the intelligence unit.”
According to the report, South Korea’s first virtual asset consumer protection law will take effect in July.
Will South Korea’s New Strategy Stop the Wave of Crypto Crime?
Starting July 19, 2024, South Korea will implement the Virtual Asset User Protection Law. This indicates a significant overhaul in the regulatory approach to cryptocurrencies. Such a law will impose strict penalties, including life imprisonment for individuals who engage in illicit crypto profits exceeding $3.7 million.
However, its main objective is to ensure the safety and security of the growing crypto industry in anticipation of substantial growth in the coming years. Meanwhile, despite significant law enforcement efforts in the cryptocurrency sector, not all law enforcement actions in the country have yielded successful results.
A media outlet recently reported that South Korean cryptocurrency traders faced accusations of engaging in arbitrage between local and foreign exchanges. However, they were acquitted after the initial trial. These traders were allegedly trying to exploit the price difference, known as the Kimchi premium, between South Korean exchanges and those operating abroad.
Prosecutors alleged that this price difference ranged from approximately 3% to 5%, resulting in a profit of around $3.2 billion.
By Leonardo Perez
