Seoul, South Korea, has significantly elevated the regulatory standards for Virtual Asset Service Providers (VASPs), including cryptocurrency exchanges, through stricter licensing requirements aimed at bolstering market integrity and investor protection. The measures, spearheaded by the Financial Services Commission (FSC) and the Financial Intelligence Unit (FIU), mandate rigorous screening for both operational exchanges and their controlling parties.
A central component of the new regulatory framework is the implementation of enhanced ‘owner suitability tests.’ These rules now require comprehensive background checks for individuals seeking to hold significant stakes (typically 10% or more) or executive positions within licensed VASPs. The purpose is to prevent individuals with a history of serious financial crimes, regulatory misconduct, or involvement in market manipulation from controlling or managing domestic crypto platforms. If a major shareholder fails to meet the stringent integrity standards, the exchange risks losing its operational license.
Furthermore, existing crypto exchanges must demonstrate continuous compliance, which includes maintaining strict Anti-Money Laundering (AML) protocols, securing partnerships with domestic banks for mandatory real-name accounts, and regularly submitting to independent security audits. Any substantial change in ownership or key management personnel automatically triggers an intense regulatory review by the FIU to ensure the suitability of the new controlling parties.
This tightening of regulations reflects South Korea’s intent to professionalize its digital asset market, reduce systemic risk following global industry instability, and solidify the country’s position as a leader in crypto consumer protection.
Source: South Korea tightens crypto licensing rules for exchanges and shareholders
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