Compass Investments

– BitGo obtains a VASP license in South Korea amid stricter requirements for foreign companieswill others follow suit?

BitGo has solidified its position in South Koreas regulated market after the Financial Intelligence Unit (FIU) approved the registration of BitGo Korea as a virtual asset service provider (VASP).

This is the first time that a Korea-based subsidiary of a foreign crypto company has received such registration directly.

Chen Fan, CEO of BitGo Korea and Chief Revenue Officer at BitGo, noted that this approach demonstrates a long-term commitment to South Koreas regulatory environment.

Supporting this decision, Abel Seou, Managing Director and Head of Sales for the Asia-Pacific region at BitGo, pointed to growing interest in security issues alongside bringing operations into compliance with local regulations.

Overall, this approval intensifies competition in the institutional custody sector and demonstrates that foreign crypto companies can directly enter the South Korean market provided they comply with local requirements.

While BitGo is building a regulated infrastructure for institutional investors, yet another dispute with an exchange highlights how these same compliance systems can impact routine fund transfers.

HTX, which is under scrutiny due to poisoned addresses, stated that an internal audit found no official accounts involved in the poisoned address transfers reported by users.

Instead, several cases came to light after Kraken froze customer funds, with the affected account balances totaling approximately $4.2 million.

Since then, HTX has spent more than two months lifting the restrictions imposed on the accounts. However, these prolonged account freezes have raised a broader question about how exchanges distinguish between potentially suspicious transactions and legitimate fund transfers.

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Stricter enforcement of compliance standards can protect platforms from illicit money flows, but overly broad enforcement measures may also restrict the activities of bona fide users. At the same time, overly strict compliance measures may restrict access for honest market participants.

Therefore, exchanges must find ways to resolve this dilemma, as continuing the practice of prolonged account freezes could ultimately force exchanges to sacrifice user trust in order to secure regulatory protection.

The conflict between HTX and Kraken has clearly demonstrated why South Korea is tightening controls on the outflow of funds abroad from organizations subject to domestic regulations. Under the updated regulatory framework, transfers between local virtual asset service providers (VASPs) now require the senders and recipients details to be provided, regardless of the transaction amount.

At the same time, foreign exchanges and self-custody wallets are subject to additional requirements for user identity verification. Furthermore, for most transfers, the funds must belong to the same person.

Transfers of 10 million won or more are also subject to mandatory internal monitoring when sent to specified destinations.

This creates a clearer distinction between access to domestic and foreign resources. Registered companies, such as BitGo Korea, can operate within the framework of local laws, while unregistered counterparties are subject to more rigorous oversight.

As the new rules are implemented, delays in transfers and the number of rejected transactions will reveal the extent to which these measures will change access to cryptocurrencies abroad.

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