South Korea’s Financial Supervisory Service (FSS) has announced the launch of on-site inspections of crypto asset exchanges, with Bithumb being the first platform under review. The inspections will commence after the Chuseok holiday, marking the regulator’s first in-depth examination of virtual asset service providers (VASPs) under the new legal framework.

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The inspection will primarily focus on Bithumb’s compliance with the recently established Virtual Asset User Protection Act. This regulation, which seeks to improve the safety and openness of the crypto market in South Korea, outlines several rules that VASPs must adhere to.

The FSS will evaluate Bithumb’s adherence to these regulations, paying particular attention to its efforts to safeguard customer funds and ensure transparent operations. Additionally, the FSS will scrutinize Bithumb’s customer protection systems, including its measures to prevent data breaches, secure customer assets, and facilitate seamless transactions.

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The inspection will also examine Bithumb’s efforts to combat market manipulation. The FSS is expected to review measures the exchange has taken to deter market manipulation, insider trading, and other illegal activities. These practices have become a growing concern for regulators as the crypto market matures and attracts more participants.

Implications of the Virtual Asset User Protection Act

The Virtual Asset User Protection Act, recently enacted to strengthen regulations in the cryptocurrency market, mandates that VASPs implement stricter anti-money laundering (AML) and know-your-customer (KYC) measures. The legislation also includes robust provisions to protect user funds and prevent fraud.

Previously, Coin Edition reported that South Korea’s FSS is investigating major crypto exchanges like Upbit under the new regulations. The FSS aims to identify and address any illicit practices, utilizing comprehensive monitoring systems to detect suspicious transactions in real time.