South Korea Exchange Association Petitions OKX for Offering Services Without Approval
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A group of cryptocurrency exchanges known as the Digital Asset Exchange Alliance (DAXA) has reported rival OKX to the financial authorities in South Korea.
According to a Feb 7 report, OKX faces regulatory scrutiny by South Korean authorities after a report that it targeted local traders without the required regulatory approvals.
The report, citing people familiar with the matter says that DAXA received the initial complaint of OKX operating without a license. The complaint was forwarded to the Financial Intelligence Unit (FIU) an arm of the Financial Services Commission (FSC).
DAXA is made up of five cryptocurrency exchanges operating in South Korea; Gopax, Upbit, Bithumb, Coinone, and Korbit which make up 99% of trading volumes since its formation in 2022.
OKX Sponsors Jumpstart Program, DAXA Alleges
OKX is being accused of advertising its Jumpstart Program to local investors by deploying Telegram influencers. Local sources disclosed to reporters that OKX paid local Telegram communities to promote Jumpstart.
In a similar case in the United States, the Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance for multiple charges including targeting United States investors.
“Binance has at all times embraced a wink-and-nod corporate ethos toward getting U.S. customers through ‘creative means,” the filing read.
OKX Doesn’t Offer Local Language Support
Per the release, the FIU will verify all claims and take necessary actions depending on the findings.
The issue of foreign language support will play a major role in the investigation because a significant criterion for determining if an exchange operates domestically is Korean language support.
At the moment, OKX does not offer Korean language support on its website, leaving only the issue of paying local influencers to target local traders in the country.
In Aug 2022, South Korean authorities flagged 16 crypto-related companies including Kucoin and MEXC for offering the Korean language on their websites. The websites also included promotions for holding events to attract customers.
In recent months, South Korean authorities have made extensive efforts to protect digital asset investors in the country by setting up investigation units and tightening regulations.
🇰🇷 South Korean Regulator to Establish Standards for Issuance and Distribution of Crypto
Under recent legislation, South Korea's regulator plans crypto issuance guidelines to bolster user protection. #CryptoNewshttps://t.co/jFtd9Uu59K
— Cryptonews.com (@cryptonews) October 18, 2023
The law prohibits all foreign exchanges from offering services to local investors without proper approval. Аuthorities have already issued deadlines to cryptocurrency exchanges to register or cease all operations.
Despite this, local traders can still access and utilize foreign platforms. However, the issue arises when foreign unregistered exchanges target local investors through media campaigns, advertising, and other marketing services.
To protect users, the FSC rolled out rules to ensure exchanges ensure assets match their economic values and hold 80% of deposits off the internet. The regulation further seeks to impose stricter penalties on digital asset traders who carry out “illegal activities.”
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