With the Korea Communications Standards Commission effectively idle…unregistered crypto exchanges continue operating openly

Despite being designated an "unregistered operator"

No blocking measures carried out

Fallout from the KCSC’s "three-member" lineup

High potential for criminal misuse

Criticism of a "regulatory blind spot" as well

Some exchanges designated by financial authorities as unreported virtual-asset (cryptocurrency) operators are found to be continuing to operate openly in Korea. While the government is raising the intensity of inspections of virtual-asset exchanges, criticism is mounting that overseas unreported operators are being left in a regulatory blind spot.

According to relevant ministries on the 10th, the Financial Intelligence Unit (FIU) under the Financial Services Commission last month designated BingX, a Singapore-based virtual-asset exchange, as an “unreported virtual-asset service provider.” An unreported operator is a firm that has not obtained the authorities’ virtual asset service provider (VASP) license. An FIU official said, “(Unreported operators) are businesses that do not file reports with financial authorities, so caution is required when using and trading.”

Despite the designation, BingX had until recently carried out marketing aimed at Korean users through YouTube and other channels. Under the Act on Reporting and Using Specified Financial Transaction Information (the Specified Financial Information Act), it is illegal for an unreported virtual-asset service provider to solicit Korean nationals. The FIU initially moved to block access to BingX’s website when it designated the exchange as an unreported operator last month. However, as of this day, BingX’s official website was still accessible as normal.

BingX’s continued accessibility in Korea despite the authorities’ measures is largely attributable to the Korea Communications Standards Commission (KCSC) being effectively “shut down” since last year. Under current law, website access blocking must be approved by the KCSC. However, since its launch in October last year, only three of the nine statutory members have been appointed.

As a result, most unreported virtual-asset service providers designated by financial authorities since the second half of last year have not been blocked. Exchanges such as KCEX and QXALX, which the FIU identified as unreported operators in the second half of last year, are representative cases. KCEX, in particular, was designated an unreported operator about six months ago but is still running a Korean-language website. An FIU official said, “It is impossible to block a specific website without KCSC approval,” adding, “Once the commission is staffed, we plan to request cooperation from the KCSC again.”

The problem is investor harm. Because unreported virtual-asset service providers are not subject to the authorities’ management and supervision, they are more likely to be exploited for crime. According to data submitted by the National Police Agency to the office of Rep. Choo Kyung-ho of the People Power Party, losses from domestic virtual-asset crimes over roughly the past six years—from 2021 through August last year—have already reached 6.6 trillion won. A government official said, “(Unreported operators) often lack sufficient safeguards for user protection and anti-money laundering (AML), raising concerns that they could be used not only for hacking and fraud but also for concealing criminal proceeds.”

Some also view the situation as evidence that misalignment between authorities has created a regulatory blind spot. Critics say that even after financial authorities designate illegal exchanges as unreported virtual-asset service providers, it can take months or more before the KCSC blocks access—effectively giving them a “liability-free period.” An industry official said, “There could be an issue of reverse discrimination against domestic VASP operators that bear the regulatory burden,” adding, “If (unreported operators) continue operating in Korea and user losses occur, it could also hurt confidence in the entire market.”