South Korea Warns Unregistered Virtual Asset Service Providers (VASPs) to Stop Providing Services

The Financial Services Commission of Korea has issued a warning to 16 unregistered “Virtual Asset Service Providers” or VASPs – the term utilized by the FATF for crypto exchanges. According to a statement by the Commission, the Korea Financial Intelligence Unit (KoFIU) has notified 16 unregistered VASPs of providing illegal business activities.

Korea is in the process of having all digital asset marketplaces seek approval and registration by the regulator.

KOFIU told virtual asset users to “practice extra caution in order to avoid incurring damages that may result from their transactions with unregistered VASPs.”

The 16 crypto exchanges are foreign-based operations that include some well known names in the crypto sector, including:

  • KuCoin,
  • MEXC,
  • Phemex,
  • Bitrue,
  • Bitglobal,
  • CoinW,
  • CoinEX,
  • AAX,
  • ZoomEX,
  • Poloniex,
  • BTCEX,
  • BTCC,
  • DigiFinex,
  • Pionex

The regulator states that these 16 VASPs have been engaging in business activities targeting domestic consumers by offering Korean-language websites, having promotional events targeting Korean consumers and providing a payment option that supports the purchase of virtual assets using credit cards.

On July 22, 2021, the KoFIU notified foreign-based VASPs that have business operations targeting Koreans about their obligation to register their business with the authority pursuant to the Act. The 16 VASPs above were found to have business operations targeting Koreans without obtaining registration.

Reportedly, the relevant investigative authority has been notified about the violation of registration duties and plans to inform FIUs in their respective countries about their violation.

For illegal business activities of unregistered entities, penalties may be a maximum of 5 years of imprisonment or up to KRW50 million of fine can be imposed with a restriction for registering as a VASP in the domestic market for a certain period of time.

KoFIU has requested the Korea Communications Commission and the Korea Communications Standards Commission to block domestic access to the websites of unregistered VASPs to prevent the use of virtual asset services provided by unregistered entities. Additionally, credit card usage for these unregistered VASPs will be blocked as well as transfers.


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