Seoul Cracks Down on 27 Crypto Exchanges, Will Local Market Attract Investors Back?
Key Summary
South Korea's Financial Intelligence Unit has blocked access to 27 unregistered crypto exchange websites, including KuCoin and MEXC, citing lack of investor protections and excessive fees. The move is expected to restrict withdrawals and potentially lead to a decrease in local market activity.
Background Context
South Korea has ordered domestic access blocks on 27 unregistered crypto exchange websites, including KuCoin, MEXC, Phemex, BingX, and BitMart. The Financial Intelligence Unit (FIU) disclosed the order on October 13. The country's communications review body approved the blocks after reviews on October 6 and 7. Sites hosted abroad face access blocks, while those with servers or operators in Korea face service termination.\n\n
Impact on Traders' Money
The FIU urged users holding assets on unregistered platforms to withdraw them immediately. It acknowledged the blocks may restrict withdrawals and plans to guide users through the Digital Asset eXchange Alliance (DAXA). In a statement to BeInCrypto, a KuCoin spokesperson said the exchange respects regulations across jurisdictions.\n\n
Market Reaction
Regulators plan to seek blocks once they detect unregistered activity, pending the review body's approval. According to the FIU announcement, they will no longer wait for court rulings or confirmed user losses. Regulators judge whether an offshore platform operates locally by weighing Korean-language sites, marketing to Koreans, and won payment support. Operating without registration can bring up to five years in prison or a 50 million won fine. The FIU has referred 44 unregistered operators to investigators. It plans to seek further blocks on replacement sites that relaunch under new addresses.\n\n
Market Reaction Continued
The FIU also cited high fees. A June probe by DAXA and registered operators found flagged exchanges charged average fees of 1.5% to 10%. That is up to 62 times the 0.16% average on Korea's five largest won-based exchanges. Korean investors paid foreign exchanges an estimated $3.5 billion in fees in 2025, according to Tiger Research. The firm and Chainalysis put the amount moved from Korean to overseas exchanges at about 700 trillion won from 2021 to 2026. That total includes a projection for this year and covers only traceable routes. Net stablecoin outflows from Korea's major exchanges also ran for an 18th straight month in June. Traders who bring funds home will find a smaller market. Crypto on Korean exchanges lost 33% of its market value in the first half of 2026. The drop, measured against the second half of 2025, left it at 58.9 trillion won. Some Korean money has already moved beyond centralized exchanges. Tiger Research found Korean-owned wallets deposited about $1.64 billion into Hyperliquid, Lighter, and Variational since January 2024.\n