The Digital Asset Exchange Alliance (DAXA) announced on the 10th that it conducted an intensive investigation into illegal virtual asset operators and reported 12 companies to police. The investigation targeted operators who failed to fulfill registration obligations with the Financial Intelligence Unit (FIU) under Article 7 of the Special Financial Information Act, including those exchanging virtual assets for Korean won outside the regulated system via Telegram and websites, and unregistered overseas exchanges conducting business targeting Korean users. The investigation aimed to prevent illegal digital asset business operations occurring outside the institutional framework, where operators exchange virtual assets for Korean won or overseas exchanges illegally target Korean customers.
DAXA Investigation Uncovers 12 Illegal Virtual Asset Operators
The investigation identified 12 operators conducting illegal business without registration under the Special Financial Information Act: 8 illegal over-the-counter (OTC) exchanges and 4 overseas exchanges operating domestically. These operators were found trading digital assets without proper registration.
Illegal OTC Exchanges Charge Fees Up to 62 Times Higher Than Licensed Platforms
The illegal OTC exchanges charged average trading commission fees ranging from a minimum of 1.5% to a maximum of 10%. This compares to an average of 0.16% charged by the top five domestic exchanges, representing fees up to 62 times higher. DAXA warned that willingness to pay fees at least 10 times higher suggests strong likelihood these services are used for criminal activities such as drug trafficking and gambling, which cannot be exchanged through official channels.
Some illegal OTC exchanges requested personal information including resident registration cards and bank account copies from users without legal basis. DAXA stated that while these operators present this as a legal identity verification process, they are not legally registered virtual asset service providers and therefore their personal information collection may violate personal information protection laws.
Unregistered Overseas Exchanges Operate Without Korean Regulatory Oversight
Multiple unregistered overseas exchanges were caught targeting Korean users through Korean-language websites, Korean won payment support (or display), and marketing campaigns aimed at Korean customers. These unregistered overseas exchanges fall outside the management and supervision of financial authorities, lack sufficient anti-money laundering systems and user protection mechanisms required by relevant laws, and make it difficult for users to receive compensation if damages occur.
Domestic registered exchanges are required to monitor abnormal transactions under the Virtual Asset User Protection Act, but unregistered overseas exchanges operate outside financial authorities' supervisory scope, creating significant blind spots for surveillance of unfair trading practices such as market manipulation.
DAXA Pledges Continued Cooperation Against Illegal Operators
Kim Jae-jin, standing vice chairman of DAXA, stated: "This intensive investigation represents the first case of legally registered domestic virtual asset service providers cooperating to respond to illegal activities. Going forward, we will strengthen the cooperative system within the industry against illegal virtual asset operators and work hard to actively protect users and create a healthy market."
FAQ
What did DAXA announce on the 10th regarding illegal virtual asset operators?
DAXA announced it conducted an intensive investigation into illegal virtual asset operators and reported 12 companies to police. The investigation identified 8 illegal OTC exchanges and 4 overseas exchanges operating without registration under the Special Financial Information Act.
Why are illegal OTC exchange fees significantly higher than licensed exchanges?
Illegal OTC exchanges charged commission fees ranging from 1.5% to 10%, compared to 0.16% average for top five domestic exchanges — up to 62 times higher. DAXA warned that paying fees at least 10 times higher suggests these services are likely used for criminal activities such as drug trafficking and gambling that cannot use official exchange channels.
What risks do unregistered overseas exchanges pose to Korean users?
Unregistered overseas exchanges operate outside Korean financial authorities' supervision, lack required anti-money laundering and user protection systems, make compensation difficult if damages occur, and create surveillance blind spots for unfair trading practices like market manipulation since they are not subject to abnormal transaction monitoring requirements under the Virtual Asset User Protection Act.
