In a significant crackdown on cryptocurrency operations, South Korea's Financial Intelligence Unit (FIU) has launched enforcement actions against several foreign exchanges, including KuCoin and BitMEX, for failing to register as Virtual Asset Service Providers (VASPs) as mandated by the country's financial regulations. The actions could lead to severe sanctions, including blocking access to these and other unregistered platforms.
On March 21, 2025, local media reported that South Korean authorities are working in collaboration with the Korea Communications Standards Commission (KCSC) to address these violations. Among the exchanges under scrutiny are CoinW, Bitunix, and KCEX, all accused of providing services to South Korean customers without the required registration and compliance checks. By marketing and offering customer support in the Korean language, these exchanges aimed to attract local investors while flouting anti-money laundering (AML) and financial regulations.
“We are organizing damage cases and related data to strengthen communication between authorities, and we expect to see tangible measures taken within this year,” stated an FIU official, reinforcing the government's serious stance on the matter.
Crypto companies involved in activities like storage, brokerage, and management are required to report their operations to the FIU. Non-compliance can render these companies subject to criminal prosecution and administrative sanctions, prompting authorities to ensure strict adherence to regulations. This regulatory push reflects a broader global trend where countries are tightening their grip on the cryptocurrency market.
The investigation into foreign exchanges comes at a time when homegrown entities are also facing their own challenges. Just days before, on March 20, 2025, South Korean prosecutors raided the crypto exchange Bithumb over allegations of financial misconduct involving its former CEO, Kim Dae-sik. Authorities suspect Kim embezzled approximately 3 billion Korean won (over $2 million) in an attempt to fund a new apartment purchase.
In response to these allegations, Bithumb maintained that Kim had already secured a loan to refund the money, but the scrutiny over such transactions highlights the ongoing issues in the industry. Despite this, recent data indicates that South Korea now has only 31 registered crypto firms, a significant decline from 42 in the previous year, further underscoring the tightening regulatory environment.
Over the past few years, South Korean regulators have demonstrated a consistent commitment to enforcing compliance within the cryptocurrency sector. Previous actions, such as back in 2022, when the FIU requested the KCSC to block 16 unregistered exchanges, signal a longstanding focus on regulatory adherence. Such measures have resulted in several exchanges suspending operations within South Korea, reflecting a market that is increasingly hostile to non-compliant players.
As a part of their efforts to maintain market integrity, South Korean authorities are also collaborating with card companies to prevent payments intended for virtual goods and services. This initiative has further marginalized non-registered exchanges, forcing them to evaluate their market strategies and compliance status.
While South Korean officials work to uphold regulation, they must also balance these actions against public interest, as approximately 30% of South Koreans are reported to own some form of cryptocurrency. This dual approach seeks to protect consumers while enabling innovation within a heavily scrutinized space.
The Bank of Korea is taking measured steps as well; it recently announced an impending Central Bank Digital Currency (CBDC) pilot project set to roll out in April 2025. This anticipated initiative will last approximately three months and aims to explore new avenues of financial technology while reinforcing the need for stringent regulatory frameworks.
Overall, the scrutiny and enforcement actions taken against foreign and domestic cryptocurrency exchanges mark a significant moment for South Korea's regulatory landscape. As global trends continue to mold the crypto framework and local authorities prioritize user protection and compliance, the road ahead for cryptocurrency within South Korea remains under intense examination.
Industry observers will be watching closely to see how these measures impact not only the exchanges under investigation but also the broader cryptocurrency market across the nation.
