South Korea Tightens Screws on Crypto Exchanges with Major Shareholder Screening

The South Korean government has announced stricter regulations for virtual asset service providers in the country. The revised Act on Reporting and Using Specified Financial Transaction Information, which takes effect on August 20, aims to enhance trust in the virtual asset market by blocking unsound or unhealthy capital.

The centerpiece of the revision is the introduction of a fit-and-proper screening process for major shareholders. This includes the largest shareholder, major shareholders holding 10% or more of shares, and specially related persons of the largest shareholder. The scope of review has also been broadened to assess not only financial-related statutes but also records of major economic crimes.

The financial soundness requirements for service providers have also been made more specific. Virtual asset service providers must maintain a debt-to-equity ratio of 200% or below, and have no record of debt default over the past three years. However, user deposits and unsettled balances are excluded from total liabilities.