- Korea’s Financial Intelligence Unit (FIU) initiates an in-depth investigation into Delio, a prominent virtual asset service provider, following withdrawal blockage.
- The probe is to ascertain any violations of anti-money laundering regulations, though it is speculated that Delio’s entire business operations are under scrutiny.
- Critics argue that the authorities’ actions are a “backward measure” and question the delay in intervention.
Korea’s Financial Intelligence Unit (FIU), operating under the Financial Services Commission, has begun an intensive inspection of Delio. As Korea’s leading virtual asset deposit and management service provider, the firm is under fire.
The investigation incurred following a sudden halt in customer withdrawals by Delio, which occurred just three weeks ago. Critics have expressed concerns, labelling the authorities’ sudden intervention as a “backward measure”.
On the 3rd of this month, FIU dispatched approximately ten personnel to Delio for the inspection. Delio holds the status of a registered virtual asset business operator (VASP), authorized by the Financial Services Commission.
It has been providing a deposit service that rewarded users with an interest rate exceeding 10% per annum for depositing assets like Bitcoin. However, in a sudden move last month, Delio blocked customer withdrawals.
An official from the Financial Services Commission remarked on the inspection, “We are checking whether the anti-money laundering regulations under the Specified Financial Information Act have been violated.” However, it is widely speculated that the entirety of Delio’s operations is being scrutinized.
The authorities are specifically concerned with Delio’s wallet service ‘Volt,’ which functions akin to a commercial bank’s free deposit and withdrawal passbook. It is essential for users to deposit coins into the vault to access Delio’s deposit products. The suspension of withdrawals in the vault affected not just depositors but also ordinary wallet users.
One investor stated, “about 30% of the victims are simple wallet users” and emphasized, “the authorities who gave VASP to the Delio storage business are also responsible.”
Though the FIU’s mandate is to supervise VASPs concerning anti-money laundering, it has been customary for authorities to oversee the general business of virtual asset companies. They do so using VASPs as leverage.
Dong-Hwan Kim, an attorney at Law Firm D’Light, commented, “Businesses such as deposits, non-fungible tokens (NFT), and decentralized finance (DeFi), which are not businesses stipulated by the Special Financial Transactions Law, are also entered in the business plan when reporting VASP.” He added that “The authorities (Delio’s) had ample opportunities to look at the fact of service changes.”
The situation raises questions regarding the efficacy and timeliness of regulatory oversight in the rapidly evolving virtual asset space in Korea. What follows next will be a point of concern for crypto users.