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South Korean Regulators Set to Carry out ‘Regular’ Crypto Firm Probes

Regulation

South Korea

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Tim Alper

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Tim Alper

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Tim Alper is a British journalist and features writer who has worked at Cryptonews.com since 2018. He has written for media outlets such as the BBC, the Guardian, and Chosun Ilbo. He has also worked...

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Last updated:

June 26, 2023

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South Korean financial regulators will start conducting “regular” on-site inspections at domestic crypto firms this year. And they say they will investigate not only exchanges, but also wallet operators and crypto custody-related firms.

The announcement was made by the top financial regulator, the Financial Services Commission (FSC), in conjunction with the FSC-operated Financial Intelligence Unit (FIU). The FIU is in charge of issuing licenses to crypto operators.

Per the media oulets Chosun Ilbo and Metro Seoul, the regulators said they wanted to “establish a system” that will let them “inspect cryptoasset-related companies on a regular basis.” The regulators want the system to be up and running by the end of this year.

The FSC conducted special probes at several crypto companies following what the media and government dubbed the “Terra/LUNA Incident” in May – when thousands of South Koreans were left out of pocket by the collapse of Terra ecosystem coins.

Regulators have pledged, in the wake of the “incident,” to shore up “investor protection” in the crypto sector. They also say they want to reduce money laundering risks.

While most previous probes have centered on crypto exchanges, the regulators confirmed they would also investigate crypto wallet operators and crypto custodians.

Wallet operators are also obliged to obtain special permits from the FIU under South Korean law.

The media outlets reported that the regulators plan to use “investigation methods” that are “similar to those used to probe traditional financial companies.”

South Korean Regulators Step up Scrutiny of Crypto Companies

There are currently 36 registered crypto-asset operators in South Korea. And the FSC says that some 6.9 million South Koreans currently trade or hold crypto on domestic platforms.

The regulators added that they would prioritize their inspections of high-volume players in the sector.

The FSC and the FIU also added they would “encourage other businesses to properly establish and implement anti-money laundering systems by “continuously sharing” the findings of their inspections with the industry.

The government has previously pledged to create a new crypto industry regulator that will wield sweeping new powers over the sector.