South Korea’s crypto economy has recently been spotlighted, not for its innovation, but for its regulatory bodies’ scrutiny of the crypto industry.
Now, the Web3 game developer Wemade is under investigation for potentially evading legal obligations as a virtual asset operator and accruing profits outside the sanctioned legal framework. This development raises significant concerns about enforcing regulations in the market.
Why Wemade Faces Legal Scrutiny
Wemade, the company behind Wemix with a valuation of over $1.2 billion, faces legal scrutiny. According to the news outlet Munhwa, the Seoul Southern District Prosecutors’ Office is leading the probe, combining several allegations into one under the Financial Investigation Unit (FIU).
The allegations range from abnormal transactions to accusations of coin over-issuance fraud by the company’s top brass. The inquiry focuses on WEMIX 3.0, Wemade’s play-to-earn platform. It merges virtual assets with gaming, where players can turn in-game assets into real value.
Authorities particularly have focused on Phoenix, the crypto exchange, and PlayWallet, a digital wallet service tied to Wemade, for their alleged failure to provide private keys to users. This requirement is crucial under the Specific Financial Information Act for virtual asset services providers (VASPs).
The Web3 game developer’s decision to retract its virtual asset operator registration in late 2021 also intensified suspicions about its regulatory compliance. For this reason, South Korea’s FIU initiated the probe, given the number of alerts from the Digital Asset Exchange Association.
Despite these ongoing investigations, the market response has been relatively measured, with minor fluctuations in the trading values of WEMIX.
In a related development, crypto exchange OKX is undergoing a similar investigative web by South Korea’s FIU. It centers around allegations of engaging in unregulated activities within South Korea. These include questionable promotional strategies involving local influencers.