The South Korean Financial Supervisory Service (FSS) is set to investigate crypto exchanges to control illicit activities. The FSS will examine two Korean won-based exchanges previously subject to irregularities, three more digital asset exchanges, and one crypto wallet service. This comes after the July enactment of the Virtual Asset User Protection Act, which provided severe consequences for illicit crypto dealings.
South Korea’s FSS Targets Major Crypto Exchange
The FSS will expand its supervision to other key platforms, including Upbit, Bithumb, Coinone, Gopax, and Korbit. The inspection will, therefore, check for any form of illegality or suspicious business transactions to combat noncompliance with the rules within the industry.
The FSS will work to regulate the protection of virtual assets and keep accurate records of all cryptocurrency transactions. Moreover, the FSS will assess such exchanges based on their financial condition, emphasizing the management of user assets.
The inspection will also check whether user funds are kept in a different account from the exchange’s funds. They will also see whether the user funds are adequately protected against risks such as hacking. This detailed analysis shows that the FSS remained focused on ensuring that all exchanges were fully compliant.
FSS Warns of Strict Penalties for Violations
The FSS has stated that if any unlawful practices are found during the inspection, strict consequences will follow. The regulatory body is also willing to alter current rules if necessary during the inspection. Especially if there are major flaws. This is a clear indication that the FSS is proactive in enforcing and enhancing the legal framework of Digital Assets in South Korea.
In addition, the FSS will visit exchanges with inadequate controls in place and unsound financial situations. The purpose is to check the observance of the rules for storing and managing users’ assets. The FSS will also assess the fitness of management contracts with third-party agents like banks. This will be done to ascertain whether the contracts comply with the set regulations.
FSS Reviews Insurance and Reserve Adequacy
FSS inspection will also confirm that the exchanges hold the actual user cryptocurrencies as claimed. This is important because users’ funds should not be mixed with the exchange’s funds to avoid exposing users to certain risks. The FSS will also review whether or not the exchanges have sufficient insurance. While also checking reserves to deal with possible risks, including hacking or any other form of breach.
The actions of the FSS align with the larger efforts in South Korea to support and regulate the digital asset market. Thus, the FSS safeguards investors and the market from manipulation by focusing on the exchanges involved in unlawful activities. The regulator’s focus on preventing non-compliance and safeguarding assets is indicative of the increasing need for proper oversight in the crypto space.
