The Financial Supervisory Service to Inspect Virtual Asset Service Providers... On-site Inspections Targeting 'Weak Internal Controls'

First On-Site Inspection After the Enforcement of the Virtual Asset User Protection Act

Financial Supervisory Service building in Yeouido, Seoul. Photo by Heo Younghan younghan@

Financial authorities are conducting their first on-site inspection since the enforcement of the Act on the Protection of Virtual Asset Users. They plan to check whether mandatory requirements, such as establishing a user protection system, are being implemented.

The Financial Supervisory Service (FSS) announced on the 3rd the "2024 Second Half Virtual Asset Business Operator Inspection Operation Plan," which investigates whether major operators comply with the Act on the Protection of Virtual Asset Users.

Considering notable issues identified during supervisory activities, two exchanges operating KRW markets were selected as inspection targets. Additionally, operators with poor financial conditions and weak internal controls related to virtual asset custody will be selected for on-site inspections.

Based on the level of internal controls and financial status identified through on-site visits, consulting, and complaints, three coin market exchanges and one wallet/custody operator have been designated for on-site inspections. Furthermore, prompt thematic inspections will be conducted on significant suspected violations reported through tips and complaints.

The FSS will focus on checking whether virtual asset business operators comply with regulations on the custody of user assets (deposits and virtual assets) and market self-regulation related to user protection systems.

Operators with poor financial conditions or weak internal controls related to virtual asset custody, which raise concerns about potential user damages, will be proactively addressed.

The establishment of a continuous monitoring system for abnormal transactions, including unfair trading such as price manipulation, will also be a key focus of the inspection.

An FSS official stated, "We will strictly sanction any violations found during the inspection process," and added, "We plan to identify areas for institutional improvement to help operators strengthen their self-regulatory functions."

This content was produced with the assistance of AI translation services.