South Korea is set to take action against several overseas cryptocurrency exchanges that have been operating illegally within the country. These exchanges, including Bitunix, CoinW, KuCoin, and KCEX, have allegedly been offering financial services to South Korean citizens without the necessary registration as Virtual Asset Service Providers (VASPs) under the Specific Financial Information Act.

KuCoin, one of the largest exchanges on the list with a daily trading volume of $850 million, is among those facing potential sanctions. The Korea Financial Intelligence Unit (FIU) of the Financial Services Commission has been conducting investigations into these platforms and claims that they have been conducting operations in the Korean language.

Authorities have highlighted that these exchanges failed to provide adequate marketing and customer support while targeting South Korean users. In response, regulatory actions are being considered, which may include blocking access to the websites of the listed exchanges with the assistance of the Korea Communications Standards Commission. The FIU has stated that these sanctions will be implemented within the current year.

It is emphasized that VASPs are required to report to the FIU and obtain approval before engaging in any financial activities. Failure to comply with these regulations could lead to legal consequences and administrative penalties. While BitMEX was mentioned in connection with the list of sanctioned exchanges, the platform clarified that the sanction was related to a Travel Rule, which has already been addressed.

South Korea is recognized as a significant player in the global cryptocurrency market, ranking 19th in the “2024 Global Crypto Adoption Index” report by Chainalysis. The country witnessed a surge in retail crypto trading volume in December 2024, surpassing its stock market volume by 22%. Despite its prominence in the crypto space, South Korea’s regulatory environment has compelled numerous local exchanges to cease operations due to mounting regulatory pressures.

Recent reports indicated that 11 crypto exchanges had to halt their services in the past year due to regulatory scrutiny, reducing the total number of active exchanges in the country to 31. Notably, a substantial portion of South Korea’s crypto trading volume is concentrated on major exchanges like Upbit and Bithumb. Even Upbit, the largest exchange in the country, received a notice of partial business suspension from the FIU earlier this year for non-compliance with anti-money laundering policies.

As the regulatory landscape evolves, the crypto industry in South Korea continues to face challenges, with authorities taking steps to ensure compliance and protect investors. The crackdown on illegal crypto exchanges underscores the government’s commitment to maintaining oversight and fostering a secure environment for cryptocurrency trading within the country.