Financial Authorities Conduct Emergency On-Site Inspection of Crypto.com... Korea Launch Delayed to 29th

Financial Services Commission FIU Identifies AML Concerns
Crypto.com Service Delay Scheduled for 29th This Month
"No AML Issues During OKBit Operation"

The Financial Intelligence Unit (FIU) under the Financial Services Commission detected suspicious activities related to anti-money laundering (AML) by the global cryptocurrency exchange Crypto.com, which is about to enter the domestic market, and conducted an emergency on-site inspection on the 23rd. Photo by Patrick Yoon, President of Crypto.com Korea.

The Financial Intelligence Unit (FIU) under the Financial Services Commission conducted an urgent on-site inspection on the 23rd after detecting suspicious activities related to anti-money laundering (AML) by Crypto.com, a global virtual asset exchange preparing to enter the domestic market. Due to regulatory intervention, Crypto.com's service launch in Korea, initially scheduled for the 29th of this month, has been postponed indefinitely.

An official from the financial authorities explained, "There were concerns regarding the company's AML activities, prompting an urgent on-site inspection," adding, "There were parts in the submitted documents that required verification on-site."

Crypto.com was set to officially start operations in Korea on the 29th of this month through the Crypto.com application (app). The company planned a fresh start by fully acquiring OK-BIT, a domestic coin market exchange it purchased in 2022. At a press conference, Crypto.com also expressed its ambition to provide fair prices without the 'Kimchi Premium' (the price difference between virtual assets traded in Korea and overseas exchanges) using its own technology. The Kimchi Premium, common in domestic exchanges due to high demand for virtual assets in Korea, is known to be around 10%.

With the financial authorities stepping in, Crypto.com's domestic service launch date has been postponed indefinitely from the 29th of this month.

Crypto.com stated, "Crypto.com operates under the industry's highest standards for anti-money laundering," and added, "We will postpone the domestic app launch scheduled for the 29th next week and clearly explain our thorough policies, procedures, systems, and discipline, which have been verified and approved in major global markets, to the Korean regulatory authorities." They also said, "Although Korea is a challenging market for global virtual asset exchanges to enter, we aim to cooperate with Korean regulators and strive for responsible industry development for Korean consumers."

Furthermore, they noted, "Since acquiring OK-BIT, Crypto.com has not attracted new customers in Korea," adding, "At the time of acquisition, about 900 customers were using OK-BIT, and there was no history of violations of the Anti-Money Laundering Act. After the acquisition, existing OK-BIT customers were only allowed limited use of withdrawal functions."

In the market, there are two interpretations: one is that the financial authorities are conducting a preemptive inspection to provide guidelines ahead of the launch of the virtual asset exchange, and the other is that there may have been issues during the operation of the previous exchange. Additionally, some analysts suggest that the authorities might have detected problems related to Crypto.com's core policy of offering global market-level prices without the Kimchi Premium.

Professor Hwang Seok-jin of Dongguk University's Graduate School of International Information Security said, "The on-site inspection regarding money laundering can be interpreted in two ways: either as a warning to newly opening exchanges to pay special attention to AML obligations such as customer verification, or as pointing out issues that arose during the operation of the previous exchange," adding, "The financial authorities' stance is also to provide guidelines proactively and then proceed with inspections, so it could be in that context."

Regarding the service direction to eliminate the Kimchi Premium, he expressed doubts. Professor Hwang said, "It is inherently impossible for a specific exchange to offer the same prices as other exchanges, not only domestically but also internationally, due to the nature of virtual asset exchanges," and added, "The actual implementation of the service will have to be seen when it launches, but it could be perceived as the exchange artificially intervening in the market."