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Regulator steps up warnings on overseas cryptocurrency exchanges targeting Koreans

SEOUL, July 22 (Yonhap) — Foreign cryptocurrency exchanges targeting Korean people will face blocked access to their websites and criminal probes unless they register with South Korea’s anti-money laundering body, the nation’s top financial regulator said Thursday.

By Sept. 24, all cryptocurrency exchanges using Korean currency must register with the Korea Financial Intelligence Unit (KFIU) under the nation’s new regulation that aims to prevent money laundering.

The KFIU sent a notice to 27 foreign cryptocurrency exchanges that have business operations targeting Korean people about this requirement under the new regulation, the Financial Services Commission (FSC) said.

The new regulation also requires cryptocurrency exchanges to have a certificate on information security from South Korea.

So far, no foreign exchanges have obtained such a certificate, FSC officials said.

Unless foreign exchanges register with the KFIU, they shall cease business operations targeting Koreans starting Sept. 25, the FSC said in a statement.

“If they continue to operate without registration, they will be subject to up to five years of imprisonment or a maximum fine of 50 million won (US$43,455),” it said.

The new regulation will also apply to domestic cryptocurrency exchanges.

Under the new regulation, which went into effect in March with a six-month grace period, banks are required to issue real-name accounts under stricter guidelines to prevent money laundering.

Under the new rule, banks will assess a cryptocurrency exchange’s transparency, business risks and the possibility of criminal activity.

Minor cryptocurrency exchanges, which are estimated to number around 100 in South Korea, have been using opaque accounts to lure investors. Such accounts enable cryptocurrency exchanges to manage investors’ money with their own bank accounts.

Beginning Sept. 25, minor cryptocurrency exchanges will be banned from withdrawing money for cryptocurrency trading if they have no real-name bank accounts.

Despite repeated warning from policymakers, Korean investors have been heavily buying virtual currency, seeing it as a lucrative asset amid the pandemic.

More young people have been investing in cryptocurrencies, anticipating higher returns, with some saying they cannot buy homes solely with their income amid skyrocketing home prices.

kdh@yna.co.kr
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