South Korea Cracks the Whip on Unregistered Digital Asset Exchanges, Targeting Bans on KuCoin, BitMEX, and Others

South Korea is cracking the whip on digital asset exchanges operating in breach of the country's financial regulations and is targeting bans on KuCoin, BitMEX

South Korea’s financial regulators are moving to shut down digital asset exchanges that are operating in the country despite failing to register with the required authorities, a new report claims.

According to a report by the local business paper The Korea Economic Daily, the Financial Intelligence Unit (FIU) is planning sanctions and other access restrictions on exchanges that have yet to sign up as financial operators with the Special Financial Transactions Act.

The FIU, which falls under the Financial Services Commission (FSC), has begun investigating some offshore exchanges for this breach, including BitMEX, KuCoin, KCEX, CoinW, and Bitunix. It claims that they have been operating Korean-language websites without reporting to authorities.

The report adds that exchanges contacted by the paper quickly denied any wrongdoing. BitMEX told media outlets that it does not operate any Korean-language websites. KuCoin said it was "closely monitoring regulatory developments" in Korea and would engage with the FIU and other regulators to resolve the situation.

KuCoin and BitMEX are no strangers to regulatory run-ins. Two months ago, KuCoin pled guilty to operating an unlicensed money-transmitting business in the United States and settled with the Department of Justice (DOJ) for nearly $300 million. The DOJ found that the exchange deliberately avoided implementing anti-money laundering (AML) policies and facilitated billions of dollars in suspicious transactions. Just days prior, BitMEX was fined $100 million for violating U.S. AML laws; it was the second time the exchange paid a $100 million fine.

Back in South Korea, authorities have upped the ante on VASP compliance in the past year. Last month, the FSC imposed a partial three-month ban on Upbit, the largest Korean exchange, for failure to fully comply with AML laws. A week ago, Seoul police raided Bithumb offices to probe embezzlement claims by former CEO Kim Dae-sik. Bithumb is the second-largest exchange.

The latest data shows that more than 9.6 million South Koreans hold an account with the country’s top five licensed ‘crypto’ exchanges.