The Korea Financial Intelligence Unit of the Financial Services Commission initiated its monitoring and supervision in relation to cryptocurrency exchanges by making market manipulation subject to punishment. However, it is maintaining its stance to limit its regulation to money laundering prevention.
The Korea Financial Intelligence Unit had a meeting with cryptocurrency exchanges on June 3 and advised them to submit business plans including how to protect traders. In addition, it clarified a ban on cross trading and trading by executives and staff members at the exchanges, saying that the exchanges are responsible for detecting cryptocurrency-related illegal activities and the exchanges and banks doing business with them are responsible for the repercussions of the activities.
Under the circumstances, banks are likely to stop their business with the exchanges, that is, real-name account issuance, and a number of exchanges are likely to be forced out. Approximately 60 cryptocurrency exchanges are currently doing business in South Korea according to the government and only 19 joined the meeting. This means a large number of cryptocurrency investors are currently exposed to the risk of investment losses.
Nonetheless, the financial authorities are refusing to expand the scope of regulation in that market manipulation detection is practically extremely difficult in the 24-hour global market and more regulation may be regarded as institutionalization. “Any stipulation of investor protection will cause a large number of people to regard cryptocurrencies as general financial instruments, and this will be nothing but an institutionalization of speculation by the government in the end,” said a government official, adding, “We don’t have to repeat the mistake of Japan, where speculations recurred after the government embraced cryptocurrencies.”