KuCoin, a international crypto exchange, suffered a dramatic regulatory setback in March 2025. South Korea’s Financial Services Commission (FSC) expelled the exchange for failing to adhere to domestic regulations. According to the Specified Financial Information Act, all virtual asset service providers (VASPs) are required to register with the Financial Intelligence Unit (FIU). The company did not comply with this requirement. The FSC declared the exchange non-compliant, prompting swift action.
App stores followed. Google and Apple took down 22 of the foreign exchange applications on Korean platforms, including KuCoin. It also barred users from updating their apps. As of April 11, 14 of the platforms vanished from the Apple App Store, with 17 being restricted on Google Play. These actions cut off user access and severed vital updates.
Global Compliance Strategy
KuCoin changed strategy after the setback. CEO Johnny Lyu stressed a phased approach at the Token2049 Dubai conference. KuCoin now prioritizes the U.S., EU, and India for regulatory conformity. The team anticipates that success in these areas would pressure South Korean regulators to relax.
The exchange has also established a 20-person compliance team. They are most interested in compliance with the European Union’s Markets in Crypto-Assets (MiCA) framework. But problems continue. MiCA’s rules do not get enforced equally everywhere. For example, France and Germany need additional licenses for derivative trades. KuCoin’s EU affiliate postponed filing its license to maintain legal certainty.
KuCoin Overhauls Infrastructure to Meet Demands
KuCoin’s technological improvements are the key to its resurgence. The exchange is overhauling underlying systems to accommodate international compliance demands.
- Real-time monitoring: KuCoin now employs AI systems for suspect activity detection in 1,300 assets.
- Proof-of-reserve audits: Weekly Merkle tree verifications now ensure user funds are fully reserved.
- Secure wallet structure: KuCoin re-architected its vault system with multi-sig cold storage to accommodate banking regulations in South Korea.
These updates aim to address regulatory requirements and restore user trust. Unlike failed exchanges like FTX, KuCoin emphasizes transparency and custody.
South Korea’s Protectionist Market
KuCoin’s comeback to South Korea will not be simple. Local exchange Upbit is king of the market. It processes $89 billion of daily volume, many times more than Coinbase. Further, it has specific KRW-paired tokens such as Klaytn and Wemix.
Foreign exchanges are further restricted. Domestic banks do not provide fiat services to them. VASPs are also required to establish Korean subsidiaries with a minimum capital of 2 billion won. Such regulations shut out foreign competition and safeguard domestic firms.
KuCoin’s CEO accuses the FSC of unfair practices. He says that the government employs compliance as a cover for curtailing outside access. No foreign exchange has been able to register under the law as it stands. KuCoin sees this as part of larger economic protectionism.
KuCoin’s Global Path May Open Local Doors
In spite of the opposition, KuCoin is hopeful. If it gets licensed in the EU and U.S., it might strengthen its argument for South Korea. The new Virtual Asset User Protection Act might also provide an opportunity. It demands 100% cold storage—something KuCoin already has.
KuCoin’s fate in South Korea depends on one thing: establishing its global legitimacy first.
