South Korean Lawmaker Accuses Top Crypto Exchanges of Neglecting Responsibilities

A South Korean lawmaker has criticized the country’s top crypto exchanges for failing to fulfill their social and legal responsibilities amid the recent surge in crypto-related crimes and scams. The lawmaker also urged the government to impose stricter regulations on the crypto industry to protect investors and prevent money laundering.

Crypto Exchanges Under Fire for Lax Compliance

Kim Byung-wook, a member of the ruling Democratic Party and the head of the National Assembly’s Science, Technology, Information, Broadcasting and Communications Committee, slammed the four major crypto exchanges in South Korea – Upbit, Bithumb, Coinone and Korbit – for neglecting their duties as financial intermediaries.

In a press conference on Tuesday, Kim said that the crypto exchanges have not been complying with the basic requirements of the Act on Reporting and Using Specified Financial Transaction Information, which came into effect in March 2023. The law requires crypto exchanges to register with the Financial Intelligence Unit (FIU), a division of the Financial Services Commission (FSC), and obtain information security management system (ISMS) certification, real-name verification accounts and anti-money laundering (AML) measures.

Kim claimed that none of the four exchanges have completed the registration process with the FIU, and only Upbit has obtained the ISMS certification. He also said that the exchanges have not been verifying the real names of their customers, and have been allowing anonymous transactions using prepaid cards and gift certificates.

Kim accused the crypto exchanges of being indifferent to the social problems caused by the rampant speculation and fraud in the crypto market. He cited the recent cases of Coinbit, a scam exchange that manipulated trading volumes and prices, and V Global, a Ponzi scheme that defrauded over 40,000 investors of more than 1.7 trillion won ($1.4 billion).

Kim said that the crypto exchanges have been enjoying huge profits from the fees and commissions, but have not been paying taxes or contributing to the national economy. He also said that the exchanges have been evading their legal responsibilities by claiming that they are not financial institutions, but merely information providers.

Government Urged to Tighten Crypto Regulations

Kim called on the government to take swift and strong actions to regulate the crypto industry and protect the investors. He said that the government should impose a 20% tax on the income from crypto transactions, and require the crypto exchanges to report their transactions to the National Tax Service (NTS).

He also said that the government should set a deadline for the crypto exchanges to register with the FIU, and impose penalties for those who fail to do so. He suggested that the government should consider shutting down the exchanges that do not comply with the law.

Kim also urged the government to enhance the AML and anti-terrorism financing (ATF) measures for the crypto industry, and cooperate with the international community to prevent the illicit use of crypto assets. He said that the government should join the Financial Action Task Force (FATF), a global watchdog for money laundering and terrorist financing, and adopt its standards and recommendations for the crypto sector.

Kim said that the government should also establish a legal framework for the crypto industry, and clarify the definitions and classifications of crypto assets. He said that the government should consider banning certain types of crypto assets that have high risks and low utility, such as privacy coins and stablecoins.

Kim said that the government should also foster the innovation and competitiveness of the crypto industry, and support the development of the blockchain technology. He said that the government should create a sandbox environment for the crypto startups, and provide them with incentives and subsidies.

Kim said that the government should also promote the education and awareness of the crypto industry, and help the investors make informed and rational decisions. He said that the government should launch a public campaign to warn the public of the risks and dangers of the crypto market, and provide them with reliable and accurate information.

Kim said that the government should also strengthen the oversight and supervision of the crypto industry, and ensure the transparency and accountability of the crypto exchanges. He said that the government should empower the FSC and the FIU to monitor and inspect the crypto exchanges, and impose sanctions for any violations or irregularities.

Kim said that the government should also enhance the protection and compensation of the crypto investors, and establish a dispute resolution mechanism for the crypto industry. He said that the government should create a fund to compensate the victims of the crypto scams and frauds, and provide them with legal and financial assistance.

Kim said that the government should also foster the cooperation and communication among the stakeholders of the crypto industry, and build a consensus on the direction and vision of the crypto policy. He said that the government should consult with the crypto exchanges, investors, experts, academics, civil society and the media, and reflect their opinions and suggestions in the policy-making process.

Kim said that the crypto industry is a new and emerging field that has great potential and challenges. He said that the government should not ignore or neglect the crypto industry, but rather embrace and regulate it in a balanced and reasonable manner. He said that the government should aim to create a safe, fair and innovative crypto ecosystem that can benefit the society and the economy.