South Korea’s Crypto Exchanges Gain Power to Freeze Transactions

• South Korean crypto exchanges can now suspend transactions promptly without prior notice.
• The new amendment to the Virtual Asset User Protection Act aims to confront hacking, money laundering, and fraud.
• Upbit faces increased scrutiny over allegations of breaching Know-Your-Customer regulations.

Under a new amendment to South Korea’s Virtual Asset User Protection Act, crypto exchanges can now immediately suspend transactions for legitimate reasons. South Korean regulators introduced this new provision to combat hacking, money laundering, and fraud. This allows exchanges to act swiftly without notifying users beforehand, though they must do so afterward.

South Korea’s first crypto user protection act took effect on July 19, 2024. The Virtual Asset User Protection Act aligns with the country’s plan for industry expansion, ensuring customer security. In recent months, South Korea has implemented a series of rules to reduce increasing threats and unfair trading practices in the crypto industry.

Read also: Crypto Now Safer in South Korea Thanks to This New Foundation

To protect investors, the Financial Services Commission (FSC) legalized the Digital Asset Protection Foundation to safeguard cryptocurrencies, especially if exchanges fail. Additionally, following the increased volatility after the United States election, South Korea strengthened crypto regulations. These developments demonstrate the country’s growing commitment to establishing the crypto market and guaranteeing user safety.

In the latest amendment to the User Protection Act, the FSS stressed the importance of prior notice. The regulator stated that exchanges should generally give customers prior notice. However, according to the FSS’ statement, exchanges should be cautious when blocking transactions without prior notice, considering the emergency situation.

Upbit Faces Increased Scrutiny

South Korea’s largest crypto exchange, Upbit, is facing regulatory pressure over allegations of violating KYC regulations . During the exchange’s license renewal review, the Financial Intelligence Unit (FIU) of South Korea found that Upbit registered approximately 600,000 clients without proper customer verification procedures. This violation could result in fines of up to 100 million won, potentially complicating the license renewal.