[Exclusive] Financial authorities initiate sanctions against unreported overseas cryptocurrency exchanges… considering blocking access to KuCoin, CoinW, etc.

FIU "Measures will be taken within this year"

Financial authorities are set to begin sanctions against overseas virtual asset exchanges that are operating illegally in Korea without reporting as virtual asset service providers (VASP) under the Act on Reporting and Using Specified Financial Transaction Information. Blocking site access is being strongly considered as a means of sanction.

According to a financial authority official on the 21st, the Financial Services Commission's Financial Intelligence Unit (FIU) has recently classified a number of overseas virtual asset exchanges that provide services to Korean users without VASP registration as subjects of sanctions and has begun preparing related measures. The FIU is reportedly conducting investigations into the exchanges and is progressing consultations with relevant agencies.

Reportedly included among the sanction targets are overseas exchanges known to domestic investors such as KuCoin, CoinW, and KCEX. These exchanges have been operating Korean-language websites or providing marketing and customer support activities aimed at Korean investors without registration.

Under the current Act on Reporting and Using Specified Financial Transaction Information, one must formally register as a virtual asset service provider with the FIU and have the registration accepted in order to carry out business such as brokerage of virtual asset trading, custody, and management in Korea. Failure to do so is regarded as illegal operation and makes one subject to criminal punishment and administrative sanctions.

In fact, in 2022 the FIU requested that the Korea Communications Standards Commission block access to 16 unreported overseas exchanges and worked with domestic card companies to inspect and block the use of credit cards for virtual asset purchases and payments domestically. As a result, many overseas exchanges withdrew from the Korean market and suspended new registrations.

An FIU official said, "We are reviewing access-blocking measures through consultations with the Korea Communications Standards Commission for unreported overseas exchanges currently providing services to domestic investors," adding, "We are compiling cases of harm and related data to strengthen communication between authorities, and expect visible measures to be taken within this year."