[Crypto Quick Search] What are the illegal business practices of unregistered VASPs?

South Korea's Financial Services Commission (FSC) has issued a warning about the illegal operations of unregistered Virtual Asset Service Providers (VASPs). These entities often use social media platforms like YouTube and messaging apps to advertise, frequently employing misleading claims of high returns or guaranteed listings to attract users.

Operating without official registration with the Financial Information Analysis Institute (FIU) under the Specific Financial Transaction Information Act, these unregistered VASPs pose significant risks. They are not bound by regulations designed to prevent money laundering or protect user assets. This lack of oversight leaves users vulnerable to personal information leaks, hacking, and the potential misuse of their funds for criminal activities.

The FSC has identified three primary categories of illegal VASP activities. The first involves overseas exchanges that offer trading and brokerage services to domestic users through chat rooms, often avoiding Korean language services to circumvent regulations. The second type is illegal currency exchange, where unofficial exchangers facilitate the trading of virtual assets like stablecoins for fiat currency, targeting students, tourists, foreign workers, and individuals seeking anonymity. The third category includes referral schemes, where bloggers, YouTubers, or chat room operators promote unregistered VASPs in exchange for referral fees or commissions, potentially making them accomplices in illegal operations.

Users are urged to verify the registration status of any VASP they intend to use through the FIU or Digital Asset Exchange Alliance (DAXA) websites. As of June 30, only 28 VASPs are officially registered in South Korea. The FSC also advises caution against advertisements promising high returns, guaranteed principal, insider information, or global listings, as these are common indicators of potential fraud. If an unregistered VASP is suspected or confirmed, users should immediately withdraw their assets and report the entity to the authorities.