Financial watchdog clarifies role amid South Korea’s new crypto compliance crackdown

South Korea’s Financial Supervisory Service (FSS) has clarified its role regarding the rumored removal of numerous digital assets from local crypto exchanges

On June 17, reports emerged that the FSS had instructed registered crypto exchanges, including Upbit, Bithumb, and Gopax, to evaluate several tokens on their platforms. This directive aligns with the Virtual Asset User Protection Act, which mandates stringent compliance and regular assessments of listed tokens.

Under the new law, exchanges must follow stricter guidelines for token listings and reassess existing tokens biannually. They are required to evaluate the reliability of the issuing entity, user protection measures, technology, security standards, and regulatory compliance of these digital assets.

The legislation also enforces severe penalties for non-compliance, including a minimum one-year jail term or fines ranging from three to five times the illegal profits they generated from the venture. Consequently, investors worry that as many as 600 altcoins may face delisting during these reviews, triggering mass panic selling.

In response to these rumors, the FSS denied direct involvement in listing or delisting virtual assets on exchanges. The regulator emphasized that it is limited to establishing listing standards, not overseeing the review process. It stated:

“Financial authorities inspect virtual asset operators and do not directly review stocks. We participated [in the initial processes] because there was a request to provide support in creating best practices, but the announcements will be made by the exchange and DAXA.”

Additionally, there are reports that the FSS intends to create a new division dedicated to crypto regulation. This division would be responsible for policy development, regulatory oversight, and establishing a framework for the burgeoning sector.