The Digital Asset eXchange Alliance (디지털자산거래소 공동협의체·닥사·DAXA) has identified four unreported overseas digital asset exchanges that have been operating for South Korean users and requested a police investigation.

DAXA said on Sept. 1 it asked police on Aug. 31 to investigate four overseas exchanges that failed to meet reporting obligations under the Act on Reporting and Using Specified Financial Transaction Information.

Under the law, businesses conducting digital asset-related operations for South Korean users must file a report with the Financial Intelligence Unit (FIU). Those operating without filing a report can face up to 5 years in prison or a fine of up to 50 million won.

DAXA said it examined the exchanges' websites and mobile applications and confirmed signs of business targeting South Korean users.

Key examples include providing official Korean-language services, displaying trading prices converted into won (KRW), and running reward programmes that pay out Tether (USDT) or points based on logins, deposits and trading volumes.

It also confirmed cases in which the overseas exchanges provided Korean-language screens and won conversion information and carried out USDT rewards and deposit- and trading-related promotions for South Korean users.

Unreported overseas exchanges fall outside the supervision and oversight of South Korea's financial authorities, which means their anti-money laundering (AML) and user protection systems may be relatively weak.

DAXA said users need to exercise caution because it may be difficult to seek remedies through South Korean systems if incidents occur, such as suspension of withdrawals, unilateral service termination or hacking.

DAXA said it also carried out a "focused probe into illegal virtual asset operators" with South Korean virtual asset service providers (VASPs) in June and requested police investigations into 12 entities, including eight illegal over-the-counter exchanges and four unreported overseas exchanges that operated for South Korean users.

DAXA standing vice chairman Jaejin Kim (김재진) said, "Even if the server or headquarters are overseas, if they conduct business targeting South Korea, they are subject to compliance with the domestic Act on Reporting and Using Specified Financial Transaction Information." He said, "We will continue to prevent confusion caused by illegal operators and take the lead in establishing a sound trading order."