[Asia Economy Reporter Gong Byung-sun] The disclosure of the re-examination results for virtual asset service providers (VASPs) under the Act on Reporting and Using Specified Financial Transaction Information (Special Financial Information Act, or Specified Financial Act) is imminent. If they fail to pass the re-examination, they will no longer be able to continue operations, so investors are advised to closely monitor whether their registration has been accepted to minimize potential losses.
According to the industry on the 21st, the registration acceptance status of the five VASPs subject to re-examination is expected to be announced as early as the 24th. Even if delayed, the results are anticipated by the 28th at the latest. The five companies are identified as domestic cryptocurrency exchanges Wowpax and Oasis, cryptocurrency wallet and custody providers Cardo and Delio, and Pay Protocol AG. All five companies are currently operating.
FIU Focuses on Anti-Money Laundering in Re-examination
On the 23rd of last month, the Financial Intelligence Unit (FIU) under the Financial Services Commission decided to accept the registration of 29 out of 42 companies. Among the remaining 13 companies, eight voluntarily withdrew. Among these eight, cryptocurrency exchange Coinbit closed down voluntarily, while Wemade, which issues the cryptocurrency WEMIX, was not subject to VASP registration and therefore did not attempt re-examination.
The FIU has not disclosed the reasons why the five companies failed to have their registrations accepted, so the details remain unclear. However, it is known that some companies were withheld because they did not meet the FIU’s anti-money laundering (AML) standards or were not subject to VASP registration. An FIU official stated, “Since the 23rd of last month, we have focused on examining whether companies comply with the AML standards under the Specified Financial Act.”
What If They Pass the Re-examination?
If they pass this examination, the companies will be immediately released from FIU restrictions. On the 23rd of last month, the FIU ordered the companies under re-examination to stop accepting new users during the grace period. Additionally, existing users were restricted from conducting transactions exceeding 1 million KRW per transaction. If the companies’ registrations are accepted in this re-examination, they will not only be certified as simple VASPs but also be able to expand their business performance.
What If They Fail the Re-examination?
However, if they fail to meet the AML standards and their registrations are not accepted, they must immediately cease operations. Continuing to operate without registration will be considered illegal unregistered business activity and subject to criminal penalties. According to Article 17 of the Specified Financial Act, VASPs operating without registration face imprisonment of up to five years or fines of up to 50 million KRW. An FIU official explained, “If they do not pass this re-examination, it will be very difficult to obtain VASP registration in the future.”
Furthermore, companies that cease operations must take measures to allow customers to withdraw their assets. Last September, companies that failed to meet the registration deadline under the Specified Financial Act stopped operations and allowed investors to withdraw cash for at least 30 days. An industry insider advised, “The registration acceptance status of VASPs cannot be known until the results are announced. Investors should prepare to withdraw their funds in case the companies they invested in fail the re-examination to minimize losses.”
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