South Korea strengthens crypto regulation with LEI adoption and crime unit

South Korea has established an interagency investigation unit to combat cryptocurrency crimes, aiming to address the rise in illicit activities in the market and the need for investor protection, according to a July 26 report.

Concurrently, the Korea Securities Depository announced a business agreement with Code, a company specializing in travel rules, in Seoul to encourage the issuance and usage of LEI (Legal Entity Identifier) in the virtual asset market.

According to an earlier report by local news media, Yonhap News, The Seoul Southern District Prosecutors Office will establish a joint virtual asset crime investigation unit called the Joint Investigation Centre for Crypto Crimes. The unit comprises 30 investigators from seven government agencies and bodies. These include the prosecution, Financial Supervisory Service, National Tax Service and Korea Customs Service, among others.

 A separate report from FNNews cited an official statement from Prosecutor General Lee Won-Seok,

“The virtual asset crime syndicate should help the initial virtual asset market not shrink and eliminate risks to stably settle in place.”

The unit’s primary focus is on investigating market players involved in issuing or distributing cryptocurrency to identify irregular trading activities and probe associated criminal activities, the reports sai. Additionally, it will expedite the investigative process for crypto-related criminal cases, covering detection, analysis and handling.

The launch coincides with the passing of South Korea’s first-of-its-kind legislation at the National Assembly, designed to safeguard crypto investors. The new law introduces penalties, including prison sentences and fines, for individuals engaged in unfair trading practices concerning virtual assets, the utilization of undisclosed information, market price manipulation and illicit transactions.

Related: South Korea to ask firms to disclose crypto holdings starting 2024

According to a local news report by Decenter, The LEI introduced by Korea Securities Depository and CODE, is a standardized ID given to corporations worldwide participating in financial transactions. It was introduced for the efficient management of financial transaction information after the 2008 financial crisis.

The Decenter report states that Code’s agreement promotes LEI issuance among virtual asset operators. They aim to support businesses with LEIs in reporting and supervising due diligence, both inter-business and for financial institutions and regulatory authorities. Additionally, they plan to comply with the EU’s Transfer of Funds Regulation (TFR).

Koh Chang-seop, Head of the Securities Settlement Division at Korea Securities Depository, reportedly said that starting in December, LEI will replace Foreign Investment Registration Certificate (IRC) for enhanced transparency.

Magazine: Korea crypto contagion: Asia Express