South Korea seeks to block two unregistered crypto platforms as referrals reach 47

The Korea Financial Intelligence Unit (KoFIU), part of the Financial Services Commission, said on Oct. 30 it had asked the Korea Media and Communications Standards Commission to block domestic access to the websites and mobile apps of two unregistered virtual asset service providers, Tethermax and SuperTrust. Both were among three firms referred for criminal investigation the same day by the Digital Asset eXchange Alliance (DAXA), a body made up of Korean won exchanges including Upbit and Bithumb. The referrals bring the number of illegal operators KoFIU has reported to investigators to 47.

Why Aegis Ventures was left off the block request

DAXA referred Aegis Ventures, Tethermax and SuperTrust. Aegis Ventures was excluded from the block request because it has no website or mobile app used for its unregistered business. The type of measure depends on where a firm's servers or operators are located: those in Korea face service termination, while those overseas face an access block. Whether and when the blocks take effect will be decided after a review by the commission.

Under the Act on Reporting and Using Specified Financial Transaction Information, running a virtual asset business without registering with KoFIU is punishable by up to five years in prison or a fine of up to 50 million won. The law also applies to overseas firms that target Korean customers. To determine whether a firm is doing business in Korea, KoFIU weighs factors such as whether it runs a Korean-language website, holds promotions aimed at Korean customers or supports payments in won. To operate legally in Korea, a firm must meet requirements including Information Security Management System (ISMS) certification and register with KoFIU. Registered exchanges must stop dealing with unregistered operators and can be fined up to 100 million won per violation. Each time KoFIU uncovers an unregistered operator, it notifies registered exchanges so they block crypto transfers to that firm.

From KuCoin and MEXC in 2022 to 47 firms

The list of firms reported to investigators, attached to the press release, begins with overseas exchanges including KuCoin, MEXC and Phemex, reported in August 2022. KoFIU put the cumulative total at 44 on Oct. 13, and the three new firms bring it to 47. The list also includes BingX, reported in January this year, and Tapbit, BigONE and Ubit, reported at the end of August. KoFIU said firms not on the list may still be operating illegally.

Blocking has also widened. At KoFIU's request, new installations of unregistered firms' apps in Korea were first blocked on the Google and Apple app stores, and the commission decided at two review sessions on Oct. 6 and 7 to block domestic access to 27 websites of unregistered operators. KoFIU and the commission agreed at the time that because unregistered business is itself illegal, sites would be reviewed and blocked as soon as they were uncovered, even without damage reports. Since May 2024, buying crypto from unregistered firms with a credit card has also been blocked.

Blocked firms could change their site addresses to keep operating. In its Oct. 13 announcement, KoFIU said it would keep checking for such replacement sites and request further reviews. On concerns that existing users may find it hard to withdraw assets after a block, it said DAXA would guide users through withdrawal methods and procedures with the cooperation of the firms.

Fees up to 62 times those of won exchanges

KoFIU said unregistered firms can be exploited for money laundering, and that without security and user protection measures, money lost to hacks or investment fraud is hard to recover. In a joint inspection by DAXA and registered exchanges in June, the firms identified charged average trading fees ranging from 1.5% to 10%. That is up to 62 times the 0.16% average of Korea's five major won exchanges.

KoFIU said it would work with the commission and DAXA to quickly request reviews of newly uncovered firms and replacement sites, and to expand disclosure of the lists of registered providers and of firms reported to investigators.