South Korean Financial Supervisory Service to Conduct Illegal Transaction Inspections of Crypto Exchanges

The Financial Supervisory Service (FSS) of South Korea is preparing to conduct inspections of cryptocurrency exchanges in order to identify any illicit transactions.

FSS will inspect two Korean won-based crypto exchanges that were previously identified as having “unusual cases,” according to an announcement issued on Tuesday. Furthermore, the regulator will oversee three additional digital asset exchanges and one crypto wallet service.

According to Yonhap news, the FSS intends to investigate additional cryptocurrency exchanges in the event that litigation arises against them.

Following the implementation of the Virtual Asset User Protection Act in July, this represents the initial inspection of virtual asset service providers (VASPs). The act provided life imprisonment for crypto participants who acquire more than 5 billion won ($3.7 million) through unlawful transactions.

According to a report by Newsis, Upbit, Bithumb, Coinone, Gopax, and Korbit are among the exchanges that are receiving particular attention. Furthermore, the FSS will inspect six additional locations, including the Coin Market Exchange, wallets, and custodians.

The regulator’s objective is to verify that all crypto providers adhere to regulations by inspecting exchanges for any suspicious or unlawful transactions. The regulatory framework protects virtual assets and maintains a record of all cryptocurrency transactions.

The regulator mentioned that the FSS will enforce market order by imposing severe penalties on illicit activities that are detected during its inspections.

Additionally, operators with inadequate internal controls regarding crypto storage and inadequate financial standing will undergo on-site inspections.

“The translation of the release stated that we will evaluate the adherence to regulations regarding the storage and administration of user assets.”

“We will verify the reasonable calculation and payment of deposit usage fees, as well as the appropriateness of the contents of management contracts with management agencies, such as banks.”

Additionally, the FSS will verify the actual possession of the user’s cryptocurrencies, determining whether they are managed independently from their own virtual assets and purses.

The inspection will also encompass the provider’s appropriate insurance subscription and reserve fund accumulation for the responsibility of incidents, including cyberattacks.

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