South Korea’s financial regulator has announced that it will intensify its surveillance of the crypto market. It will conduct inspections of all 60 crypto exchanges across the country with the help of independent IT inspectors and the police.
Seoul, which was accused of “negligent” and dragging its feet in the crypto sector, handed nearly total control to the top financial regulator, Financial Services Commission (FSC) earlier this year.
The FSC has embraced its new role with evident zeal. It summoned the top 30 exchanges to its headquarters three times. This group includes exchanges that have obtained or are currently undergoing data protection certification (ISMS) to allow them to continue operations after September 24. Exchanges without ISMS, bank contracts, and other financial services will have to close by September 24.
Media outlets reported earlier this month that the FSC had completed a week-long on-the-spot inspection at one of Seoul’s largest exchanges. The FSC appears to be willing to take it a step further. After smaller exchanges, which appear not to be planning on applying for operating permits, began closing down. This cut investors off from their funds and raised concerns about “intentional bankruptcy”.
The FSC was motivated by the fear that unscrupulous owners might seek to declare bankruptcy on September 24, in order to avoid investors receiving fiat and tokens. The regulator will conduct on-site inspections at all remaining national exchanges, possibly using the “due diligence test” as a practice.
As part of its efforts, the regulator has joined forces with other government ministries as well as state-owned IT companies. This will include a “complete investigation” of corporate accounts and trading platforms’ “coin managing and investor protection” protocols.
Independent IT professionals from the private sector have been recruited by the state to assist in their search.
The government warned that potentially uncooperative exchanges could find themselves on the wrong side.
Inspection teams will have the ability to “seize” documents and computer hardware, and search premises “with the assistance of the police,” if needed. Teams have been instructed to “target” exchanges that are suspected of refusing inspections on-site or engaging in illegal activities.
According to the media outlet, a government official stated that:
Failure to cooperate with inspection teams could be seen as an attempt to hide insolvency. Even if it means we need to mobilize the police force, we will investigate such cases.”