South Korea’s Financial Supervisory Service (FSS) has also joined the investigation into the country’s leading exchange Upbit.
FSS will help the Korean Financial Intelligence Unit (KIU) and Financial Services Commission (FSC) to review the balance sheet of Upbit and previous regulations on cryptocurrency exchanges.
As reported last week, a source within Upbit revealed that the investigation has discovered a good cash flow issue in Upbit and there are high chances that Upbit will not face criminal or illegal activities charges.
“The irregularity being investigated is in regards to liquidity issue. The issue involves sharing/ pooling liquidity with other exchanges. It seems to be that the regulators did not understand the share liquidity. My source (an employee) claims there is no issue,” said Ran.
The FSS noted on May 13 that is has officially created a task force to look into the irregular and illegal activities of cryptocurrency exchanges within the South Korean cryptocurrency market. FSS will also take part in the investigation into Upbit and continue to research issues relating to previous exchanges that may have faked investors by acting to own cryptocurrencies or funds deposited to the exchange.
In the case of Upbit, the South Korean cryptocurrency community are with the opinion that the given that the exchange has a good cash flow, it should not be driven to take part in illegal activities in order to make more profits.
As a result, Ran stated, local analysts, are predicting that the investigation into Upbit will only conclude with a simple warning to avoid sharing liquidity with other exchanges.
Driven by the recent investigation into Upbit, FSS backed by local financial authorities will start handling illegal activities in the market with immediate effect with a dedicated department within the FSS given the responsibility to research and investigate into the cryptocurrency market.
During a press conference, the FSS highlighted that it is not illicit for cryptocurrency exchanges to increase their holdings in cryptocurrencies and exchanges are not allowed to process trades or transactions representing clients without actually moving the funds.
In short, the FSS state that an exchange does not have the right to state that it has moved funds of its clients unless the funds in cryptocurrencies are really made known to the blockchain network and officially transferred.