Crypto.com, a major global cryptocurrency exchange, has postponed the launch of its services in South Korea indefinitely. This decision follows an on-site inspection by the country's financial regulators. The inspection was prompted by concerns raised by the Financial Intelligence Unit (FIU) under the Financial Services Commission regarding potential violations of anti-money laundering (AML) regulations based on the documents submitted by Crypto.com. The delay was announced just six days before the scheduled launch date of April 29.

The exchange had obtained a virtual asset service provider (VASP) license through the acquisition of a local trading platform named OkBit in June 2022. This license is essential for operating a digital asset exchange in Korea.

Addressing the 'Kimchi Premium' Phenomenon

Initially, Crypto.com had planned to introduce a mobile app for cryptocurrency trading on April 29, with a focus on South Korean retail investors. The platform aimed to stand out from local competitors by offering crypto assets at competitive prices to counteract the 'Kimchi Premium' effect. This term refers to the tendency for cryptocurrency prices in the Korean market to be higher than those in other global markets, particularly on major licensed crypto exchanges in Korea.

The 'Kimchi Premium' often leads to Korean investors paying more for crypto assets compared to prices on international exchanges like Binance. Experts speculate that this pricing disparity could raise concerns about potential AML violations, especially if the platform's operations enable arbitrage opportunities.

Commitment to the South Korea Market

In response to the regulatory challenges, a spokesperson for Crypto.com emphasized the company's adherence to stringent AML standards. The spokesperson stated that the launch delay would provide an opportunity to ensure that Korean regulators fully understand the platform's comprehensive policies, procedures, and controls, which have been vetted and approved by regulatory bodies worldwide.

Despite the complexities of entering the South Korean market, Crypto.com remains dedicated to working closely with local regulators. The spokesperson highlighted that OkBit, the acquired platform, had a customer base of around 900 individuals and had not faced any AML violations prior to the acquisition. Since the takeover, existing OkBit customers have been restricted to withdrawals only, demonstrating Crypto.com's commitment to regulatory compliance and transparency in its operations.