South Korea’s financial regulators are intensifying efforts to crack down on unregistered cryptocurrency exchanges operating within the country.
According to a March 21 report by local media outlet Hankyung, the Financial Intelligence Unit (FIU) is considering blocking access to platforms like BitMEX, KuCoin, CoinW, Bitunix, and KCEX, which allegedly offered services to South Korean users without proper registration.
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Foreign exchanges under scrutiny
Under the country’s Specified Financial Information Act, crypto exchanges must register as Virtual Asset Service Providers (VASPs) to operate legally. Failure to comply with this directive may result in criminal penalties and administrative sanctions.
The financial watchdog focuses on exchanges that have reportedly targeted South Korean users through localised websites, marketing, and customer support without adhering to regulatory requirements.
These platforms are accused of bypassing the mandatory registration process, which includes strict anti-money laundering (AML) and know-your-customer (KYC) protocols.
This move follows a 2022 crackdown, during which 16 unregistered foreign exchanges, including KuCoin and MEXC, were blocked, prompting many to exit the South Korean market.
Due to the country’s ongoing strict measures, only 31 crypto trading firms are currently registered, down from 42 in 2024. Platforms like GDAC, ProBit, and Huobi Korea have been delisted due to compliance failures or their inability to meet the FIU’s requirements.
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Implications for users and exchanges
For South Korean users, the crackdown could mean restricted access to unregistered platforms, forcing them to transition to compliant exchanges.
This may involve transferring their assets and adapting to new platforms, which could disrupt trading activities. On the other hand, registered exchanges will likely see increased user traffic as they remain the only legal option for crypto trading in the country.
Meanwhile, the stakes are high for the targeted exchanges. Non-compliance could lead to significant reputational damage and loss of access to one of the world’s most active crypto markets.
The ongoing financial regulation actions highlight the growing global trend of stricter oversight in the cryptocurrency industry, emphasising the need for exchanges to prioritise regulatory compliance.