South Korea prepares new sanctions against crypto exchanges

Key points:

• South Korean regulator completes major inspections of crypto exchanges and prepares new sanctions package.
• The sanctions will include personal and institutional penalties, as well as significant fines.

The South Korean financial regulator is preparing a new package of sanctions for local cryptocurrency exchanges. It is stepping up the fight against anti-money laundering (AML) violations, which, according to the authorities, could undermine the stability of the country’s rapidly growing crypto market.

Financial authorities are planning to impose sanctions on both companies and individual employees. Large fines are also planned for major trading platforms that have failed to comply with anti-money laundering requirements.

The Financial Intelligence Unit (FIU) of Korea is reviewing cases as inspections are conducted, acting on a “a first-in, first-out” approach.

FIU prepares new sanctions

Following the investigation against Dunamu, the operator of Upbit, the regulator plans to take action against other major exchanges as well. Starting in 2024, the FIU will audit Upbit, Bithumb, Coinone, Korbit, and GOPAX. The purpose of the inspections is to ensure that exchanges comply with Know Your Customer (KYC) rules and report suspicious transactions.

The main part of the inspections has already been completed. Legal procedures and sanctions committee meetings are currently underway.

The authorities are developing new measures, both in terms of personnel and company structure, as well as in the form of significant financial penalties. According to experts, the total amount of fines could reach hundreds of billions of won. The final amount of sanctions will be determined by the number and scale of violations identified on each individual platform.

Previously, two cases involving manipulation of the cryptocurrency market through artificial inflation of prices and trading volumes were referred by the South Korean Financial Services Commission (FSC) to law enforcement agencies for further investigation.