South Korea's Crypto Tracking System Halted by Exchange Notification

The Korea Deposit Insurance Corporation (KDIC) has been tracking virtual assets hidden by individuals connected to insolvent financial institutions, but an incident has highlighted a major issue with the system. The KDIC had been investigating the virtual asset holdings and transaction records of 8,405 individuals linked to insolvent financial institutions since April this year. However, when Exchange A notified 46 investigation targets on June 1 that KDIC had queried their virtual asset information, it neutralized the tracking system.

The problem emerged in February this year when an amendment to the enforcement decree of the Credit Information Act brought virtual asset transaction data under the scope of personal credit information. This created a new obligation for Virtual Asset Service Providers (VASPs) to notify data subjects when providing information about insolvency-linked individuals to KDIC.

However, no deferral or exemption provisions were established for virtual asset information, unlike other financial transactions. The KDIC argued that if data provision were disclosed in advance, investigation targets could move their virtual assets to other wallets or exchanges to further conceal their holdings.