South Korea’s financial authorities have launched an investigation into cryptocurrency exchanges suspected of operating without proper regulatory approval. The Financial Intelligence Unit (FIU), under the Financial Services Commission (FSC), is reportedly preparing sanctions against crypto platforms not registered as virtual asset service providers (VASPs) according to the nation’s financial regulations.
Under South Korea’s Specified Financial Information Act, cryptocurrency exchanges offering trading, brokerage, or custody services must officially report their operations to the FIU. Failure to comply can result in severe penalties, including suspension of services and criminal charges.
Among the exchanges reportedly under scrutiny is KuCoin, along with several other platforms that authorities believe have offered marketing and customer support to Korean investors without appropriate registration. The FIU is currently working with other regulatory bodies, such as the Korea Communications Standards Commission, to determine potential measures, including blocking access to non-compliant exchanges.
This investigation follows recent enforcement actions targeting prominent South Korean cryptocurrency exchanges. On March 20, prosecutors conducted a raid on the local exchange Bithumb, investigating allegations that former CEO Kim Dae-sik embezzled company funds to purchase personal real estate. Bithumb has denied wrongdoing, claiming the embezzled funds were later repaid by Kim through a loan.
Additionally, major exchanges Upbit and Bithumb faced allegations related to improper listing practices, including claims that intermediaries received large payments to facilitate crypto listings. In response, Upbit demanded that media disclose the identities of projects implicated in these allegations.
In a further sign of regulatory escalation, Dunamu, the parent company of Upbit—the largest cryptocurrency exchange in South Korea—recently filed a lawsuit challenging sanctions imposed by the FIU. Regulators had restricted Upbit from handling external cryptocurrency transactions for new customers while existing accounts remain unaffected. The sanctions also included disciplinary actions against nine senior executives, notably issuing a formal reprimand to Upbit’s CEO and dismissing the exchange’s compliance officer, marking the first such dismissal in the country’s crypto sector.
The increased regulatory scrutiny highlights South Korea’s efforts to tighten oversight and enforce compliance across the rapidly evolving cryptocurrency market.
