Crypto.com has postponed its market entry into South Korea due to regulatory concerns. The Singapore-based cryptocurrency exchange faced an urgent on-site inspection by South Korea’s Financial Intelligence Unit (FIU), which operates under the oversight of the Financial Services Commission (FSC).
Consequently, the inspection, prompted by findings of potential anti-money laundering (AML) issues in the data submitted by Crypto.com, was initiated on April 23, just days before the scheduled launch.
Just six days before its planned retail expansion, the crypto exchange https://t.co/1aQemhmjuy postponed its launch in South Korea so it can communicate further with regulators https://t.co/JL9DzJk37Y
— Bloomberg (@business) April 23, 2024
South Korean authorities expressed concerns about the adequacy of the anti-money laundering measures presented by Crypto.com. As a result, the planned launch on April 29 has been deferred, allowing the exchange to address and clarify its compliance strategies with regulatory bodies. This decision underscores the stringent regulatory environment in South Korea, which imposes rigorous standards to combat financial crimes within the crypto sector.
Regulatory Environment and Compliance Challenges
The regulatory landscape in South Korea is particularly stringent for international crypto exchanges seeking to establish a local presence. The country has recently updated its guidelines, requiring all foreign digital assets to publish a white paper or technical manual specifically for the South Korean market before listing.
Moreover, the new regulations set forth by the Financial Supervisory Service, which began taking shape in late 2023, prohibit the listing of digital assets associated with hacking incidents unless their root causes are comprehensively addressed.
Crypto.com, which acquired the local exchange OKBit, received the necessary domestic virtual asset business license (VASP) in 2022. This acquisition was part of its strategy to penetrate the South Korean market. Despite these preparations, the recent regulatory findings have highlighted the challenges faced by international exchanges in complying with local laws, especially those pertaining to anti-money laundering protocols.
Market Adaptation and Future Prospects
In response to the regulatory intervention, Crypto.com has affirmed its commitment to upholding high compliance standards and is taking decisive steps to ensure its policies and procedures meet the expectations of South Korean regulators. The exchange has not onboarded new customers in Korea since the acquisition of OKBit, which maintained about 900 customers at the time of purchase. Since then, access for existing OKBit customers has been restricted to withdrawals only.
Crypto.com plans to engage closely with regulatory bodies to navigate the complexities of the South Korean financial landscape. The exchange aims to demonstrate the robustness of its AML strategies and other regulatory compliance measures. This approach is critical as South Korea continues to enhance its regulatory framework to ensure a secure and transparent environment for cryptocurrency transactions.
