South Korean regulator to conduct a comprehensive inspection of virtual asset exchanges to ensure compliance with regulations and protect consumers.
The South Korean financial regulator, known as the Financial Supervisory Service (FSS), has announced its plan to launch its first comprehensive inspection of virtual asset exchanges to detect illegal transactions.
This will be the first inspection on virtual asset providers since the Virtual Asset User Protection Act came into effect in July. The inspection will look into various aspects, such as compliance with the law based on new rules and not violating the industry guidelines.
Targeting Top Major Exchanges for Inspection
It was revealed that more attention would be placed on major exchanges, including Upbit, Bithumb, Coinone, Gopax, and Korbit. Moreover, the South Korean regulator will inspect six other places, such as the Coin Market Exchange, wallet, and custodians.
The selection of inspection targets will be based on some activities. According to FSS, targets will be selected by considering the impact of their business activities on the market as well as their level of user protection. With this in place, two Won Market exchanges will be selected as inspection targets.
In addition, on-site inspections will be conducted on operators with weaker financial standing and internal control, which could risk consumer protection.
Ensuring Compliance with Regulations and User Protection
The regulator stated they would be inspecting different aspects, such as checking if the operator’s user protection follows the Virtual Asset Act’s user protection requirements. They stated:
We will review compliance with regulations on the storage and management of user assets. We will check the appropriateness of the contents of management contracts with management agencies such as banks, as well as the reasonable calculation and payment of deposit usage fees.
Businesses that might not have protected users well will be inspected. Checks will also be made to see if regulations against unfair trade practices are being followed.
We will also examine the status of compliance with regulations related to unfair trade. We will confirm the appropriateness of the constant monitoring of abnormal transactions, such as detecting abnormal fluctuations in price and transaction volume, and check the appropriateness of the establishment/operation of the constant monitoring system.
A member of the FSS team stated that they will adopt a flexible inspection system, such as sending inspection personnel to deal with urgent problems or complaints. The official further noted that the regulator plans to build a market order through strict regulations that would discourage illegal activities and support businesses in strengthening their self-regulation functions.
This inspection is part of the South Korean effort to ensure a well-regulated sector for the growing virtual asset sector while prioritizing consumer protection. The country already has a Virtual Asset User Protection Act, which was implemented in July, that states that any crypto player caught gaining more than 5 billion won through an illegal transaction will be sentenced to life imprisonment.
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