DAXA Intensifies Efforts Against Unregistered Virtual Asset Service Providers

The Digital Asset eXchange Alliance (DAXA) convened a pivotal roundtable on October 30 at DreamPlus Gangnam in Seoul, focused on strengthening compliance with South Korea’s prohibition on transactions involving unregistered virtual asset service providers (VASPs), according to an announcement made on November 1. The session brought together key players in the domestic virtual asset industry to address critical challenges, such as the inherent anonymity and automated nature of blockchain transactions, which creates difficulties in identifying senders during digital asset transfers.

Industry-Wide Collaboration to Combat Unregistered Entities

The roundtable sought to empower the digital asset sector with advanced tools and strategies for detecting unregistered service providers. Presentations were led by blockchain data analytics firms Chainalysis and TRM Labs, who showcased innovative technologies capable of identifying unregistered wallets and entities. These providers also shared actionable strategies for mitigating risks associated with engaging with such entities.

Leading cryptocurrency exchanges, including Upbit and Bithumb, contributed their expertise by presenting operational case studies. Their insights detailed real-world applications of detecting and responding to unregistered service provider wallets, offering practical guidance and reinforcing industry collaborations. These discussions underscored the collective commitment to enhancing the capability of the sector in addressing this pressing issue.

Legal and Regulatory Foundations Under the Special Financial Transactions Act

The foundation for these efforts lies in South Korea’s robust regulatory framework for virtual assets, particularly under the “Act on Reporting and Use of Certain Financial Transaction Information,” commonly referred to as the Special Financial Transactions Act. This legislation mandates that all VASPs operating domestically secure approval from the Financial Intelligence Unit (FIU).

Specifically, Article 10-20 of the Act’s Enforcement Decree imposes a strict prohibition on business transactions with unregistered VASPs. Failure to comply with these requirements not only undermines legal obligations but also exposes entities and investors to heightened risks associated with money laundering and illicit activities.

Strengthening Investor Security Through Proactive Measures

In emphasizing the significance of this initiative, Kim Jae-jin, Executive Vice Chairman of DAXA, stated, “This initiative holds significant importance as it demonstrates the industry-wide commitment to cutting off transactions with unregistered service providers. We will continue to work closely with the industry to establish practical response measures, thereby creating a safer trading environment for investors.”

This coordinated effort reflects the digital asset industry’s proactive stance in adapting to evolving regulations and safeguarding its ecosystem. By fostering collaboration among exchanges, analytics providers, and regulators, South Korea’s digital asset sector is not only prioritizing compliance but also reinforcing its commitment to ensuring a secure and trustworthy trading environment for all participants.

As the regulatory landscape for virtual assets matures, the ongoing partnership between stakeholders highlights a unified dedication to mitigating risks and enhancing the integrity of blockchain-based financial systems. Through such initiatives, the industry aims to set a benchmark for global best practices in combating unregistered entities and fostering investor confidence.