South Korea Introduces Strict Crypto Transaction Monitoring System

South Korea Introduces Monitoring System

YEREVAN (CoinChapter.com) — The Financial Supervisory Service (FSS) of South Korea has introduced a system to monitor and report suspicious crypto transactions. This system aligns with the Virtual Asset User Protection Act, which takes effect on July 19. The law aims to regulate unfair trade practices and protect investors in the cryptocurrency market.

Crypto Exchange Oversight Tightens

The FSS worked with major crypto exchanges in South Korea. These exchanges, including Upbit, Bithumb, Coinone, Korbit, and Gopax, cover 99.9% of the nation’s trading volume. The monitoring system will detect abnormal transactions and report them to the FSS via a dedicated data transmission line. These transactions may involve market manipulation or other illegal activities.

Reporting and Notification System. Source: Financial Supervisory Service, South Korea

The Virtual Asset User Protection Act mandates that exchanges implement stricter review guidelines for token listings. As of June 16, 29 crypto exchanges have registered with the FSS and must follow these new regulations. This step ensures only legitimate tokens are available for trading.

Concerns Over Spot Crypto ETFs in South Korea

What is more the approval of spot Bitcoin (BTC) and Ether (ETH) exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) has gained the attention of South Korean officials. They are evaluating the potential impact of listing these investment vehicles on local exchanges.

In a recent paper, Korea Institute of Finance researcher Bo-mi Lee argued that the implementation of spot Bitcoin and Ether ETFs could have negative consequences. According to Lee, data from various jurisdictions show that the losses from these ETFs outweigh the benefits.

Debate on Virtual Asset-Linked Products. Source: Korea Institute of Finance

Lee’s research suggests that introducing spot crypto ETFs in South Korea could undermine financial stability. The paper explains that if these ETFs are approved and digital asset prices increase, a large influx of capital would enter the crypto market.

Lee also highlighted potential inefficiencies in resource allocation as a result of this capital flow. The paper warns that if digital asset prices fall, it could lead to decreased financial market liquidity and negatively impact the health of financial companies.