South Korea Intensifies Cryptocurrency Regulation: Investigating Bithumb and Order Book Sharing Concerns

South Korea's financial authorities are ramping up scrutiny over cryptocurrency exchanges, with the ongoing investigation into Bithumb drawing attention due to allegations of order book sharing with international platforms. The Financial Services Commission (FSC) has reaffirmed its stance against such practices, citing substantial barriers presented by rigorous anti-money laundering (AML) regulations. These developments spotlight the government's commitment to tightening oversight in the rapidly evolving digital asset sector.

Challenges of Order Book Sharing Under AML Regulations

The issue of order book sharing—where domestic and foreign exchanges synchronize transaction orders—was a key topic during a National Assembly meeting on October 20. Lee Hun-seung, a ruling lawmaker from the People Power Party, questioned its viability under current oversight standards, emphasizing the complexity of compliance. He explained that South Korean regulations demand daily verification and record-keeping of foreign exchange user data interacting with domestic customers. Moreover, exchanges must pre-submit detailed procedures to financial authorities to enable such activities.

Lee asked incisively, “With such arduous requirements, is it truly feasible to confirm daily transaction details with overseas exchanges?” Addressing these concerns, Park Kwang, the head of the Korea Financial Intelligence Unit (KoFIU), acknowledged significant obstacles. “Although regulations define the standards, implementing them in practice remains highly challenging,” Park admitted.

The stringent regulatory framework appears to have deliberate implications for curbing order book-sharing practices, underscoring South Korea’s broader effort to prevent potential breaches in financial transparency.

Intensified Scrutiny on Bithumb and Compliance Oversight

As part of South Korea’s systematic AML measures, the investigation into Bithumb’s operations is emblematic of heightened attention on cryptocurrency platforms. Lawmaker Lee highlighted the precision of such regulatory mechanisms, suggesting they aim not only to scrutinize existing practices but also to deter future order-book-sharing endeavors.

When asking whether any illegal activities had been detected during Bithumb’s ongoing investigation, Park stated, “We have yet to identify any signs of illegality during the inspections." However, Park stressed that routine audits of major exchanges, such as Upbit, were ongoing to ensure compliance with South Korea’s AML guidelines. Such inspections reflect the government’s intent to impose consistent regulatory vigilance on crypto exchanges.

Concern Over Binance’s Local Influence Through Gopax Acquisition

Further fueling the debate on cryptocurrency regulation in South Korea was Binance’s acquisition of Gopax, a local trading platform. Binance, as the largest cryptocurrency exchange globally, has raised questions among lawmakers about the implications of cross-border interactions between the two platforms. During the National Assembly session, Lee queried financial authorities on the possibility of order book sharing between Binance and Gopax, given their new business alignment.

Park Kwang addressed this uncertainty, clarifying that no discussions on potential order book sharing had taken place. However, he assured lawmakers, "We are closely monitoring to prevent unauthorized sharing or leakage of domestic user data."

Lee further emphasized security concerns, stating, “The possibility of domestic customer information being transferred overseas warrants meticulous review by financial authorities.” His statement underscores the growing fears that local user data might be compromised in cross-border operations, necessitating tighter procedural checks to maintain information security.

Regulatory Vigilance Reflects Government’s Push for Transparency

The investigations into Bithumb, coupled with questions surrounding Binance’s acquisition of Gopax, illustrate the increasing efforts of South Korean authorities to regulate cryptocurrency platforms. These efforts signify a larger governmental strategy aimed at managing cross-border interactions while safeguarding domestic financial systems from risks associated with money laundering and data security breaches.

As the digital asset market continues to expand globally, South Korea is solidifying its position as a highly regulated environment for crypto operations. The spotlight on Bithumb serves as a reminder of the country’s insistence on transparency and its determination to ensure compliance, even as exchanges seek to leverage opportunities on a global scale.