South Korea’s Financial Supervisory Service (FSS) is preparing to inspect crypto exchanges to identify illegal transactions.
According to a Tuesday announcement, the FSS will investigate two Korean won-based crypto exchanges where the regulator previously spotted “unusual cases.” Additionally, three more digital asset exchanges and one crypto wallet service will fall under the regulator’s scrutiny.
The FSS plans to examine other crypto exchanges if any complaints arise against them, as reported by Yonhap news.
This move marks the first inspection of virtual asset service providers (VASPs) following the July implementation of the Virtual Asset User Protection Act. The act allows for life imprisonment for crypto players who gain more than 5 billion won ($3.7 million) through illegal transactions.
According to a report by Newsis, particular attention is focused on major exchanges including Upbit, Bithumb, Coinone, Gopax, and Korbit. Additionally, the FSS will conduct inspections at six other places, including Coin Market Exchange, wallets, and custodians.
### FSS to Inspect on Illegal or Suspicious Crypto Transactions
The regulator aims to check exchanges for any illegal or suspicious transactions to ensure that all crypto providers comply with regulations. The regulatory regime includes the protection of virtual assets and keeping records of all crypto transactions.
“The FSS will establish market order through stern punishment against illegal activities that may be identified in the process of its inspection,” the regulator noted.
Furthermore, on-site inspections will be conducted on operators with poor financial status and weak internal controls related to crypto storage.
“We will review compliance with regulations on the storage and management of user assets,” the translated release read.
“We will check the appropriateness of the contents of management contracts with management agencies such as banks, and the reasonable calculation and payment of deposit usage fees.”
Additionally, the FSS will also verify the actual possession of users’ cryptocurrencies and whether they are managed separately from the provider’s own virtual assets and wallets.
The inspection will also include checking the provider’s appropriate insurance subscription and reserve fund accumulation for responsibility for accidents, including hacks.
Twitter text: South Korea’s FSS is gearing up to inspect crypto exchanges for illegal transactions. The focus is on ensuring compliance and protecting virtual assets in light of the new Virtual Asset User Protection Act. Major exchanges like Upbit, Bithumb, and Coinone will be scrutinized. #CryptoRegulation #SouthKorea #FSS
