The Digital Asset Exchange Association (DAXA) has reported the identification of 12 illegal cryptocurrency operators following a focused investigation into unregistered virtual asset businesses. The findings have been referred to the police for further investigation.
According to DAXA, the investigation, conducted in collaboration with registered domestic cryptocurrency operators over the past three months, uncovered eight illegal over-the-counter exchanges and four overseas exchanges operating within South Korea.
The trading fees charged by these illegal over-the-counter exchanges ranged from a minimum of 1.5% to a maximum of 10%. In comparison, the average fee among South Korea's top five cryptocurrency exchanges is just 0.16%, indicating fees that are up to 62 times higher.
DAXA expressed concern that the high fees associated with these illegal exchanges may be linked to the laundering of criminal proceeds from activities such as drug trafficking and gambling.
Some of the illegal exchanges were found to have collected personal information from users, including copies of identification cards and bank statements. While they claimed this was part of a verification process, DAXA noted that such practices could violate personal information protection laws since they are not registered operators.
The investigation also included unregistered overseas exchanges that operated Korean-language websites or supported transactions in South Korean won. These exchanges are not subject to oversight by financial authorities, lacking adequate anti-money laundering measures and user protection systems. As a result, the risk of market manipulation and unfair trading practices is significantly higher, and users may find it difficult to seek compensation in the event of losses.
Kim Jae-jin, DAXA's executive vice president, stated, "This investigation marks the first instance of registered cryptocurrency operators collaborating to address illegal business activities. We will continue to strengthen our cooperative framework to protect users and establish a healthy market order."
The investigation was initiated to curb the activities of illegal cryptocurrency operators who failed to comply with registration obligations under the Specific Financial Information Act, particularly those facilitating the exchange of virtual assets for South Korean won through platforms like Telegram and their websites. Under current law, operating a cryptocurrency business without reporting to the Financial Intelligence Unit (FIU) can result in imprisonment for up to five years or fines of up to 50 million won.
* This article has been translated by AI.
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