South Korea’s crypto industry has warned that proposed anti-money laundering rule changes could create heavy pressure for local exchanges.
Summary
- DAXA warned South Korea’s AML plan could raise exchange reports from 63,000 to 5.4 million.
- The proposal would flag overseas-linked crypto transfers above 10 million won as suspicious transactions automatically.
- Korean exchanges are already fighting FIU sanctions as courts review several AML-related enforcement actions.
The concern centers on a plan that would require virtual asset service providers to report all overseas-linked transfers of 10 million won or more as suspicious transactions.
The Digital Asset eXchange Alliance, known as DAXA, submitted comments on the planned changes through South Korea’s public legislation review system. The comments reflected the views of 27 registered virtual asset service providers, including Upbit, Bithumb, Coinone, Korbit and Gopax.
Suspicious reports could rise sharply
DAXA said the proposal “could” push suspicious transaction reports from the five largest exchanges from 63,408 cases last year to 5,445,133 cases, according to a Yonhap report. That would mark an 85-fold increase and may be difficult to handle in daily operations.
The group said current law requires suspicious transaction reports only when firms have reasonable grounds. DAXA argued that the proposed rules go beyond setting standards and create a new reporting duty through lower-level rules.
The group also opposed a proposed duty to verify the accuracy of customer information. It said the law already requires customer identity checks, while the new rule adds another step that may not be clearly supported by the main statute.
DAXA also said customer verification failures can lead to business suspension for crypto firms, while other financial firms may face lower penalties. The group argued that this creates unequal treatment across financial sectors.
Regulators move toward tighter oversight
The Financial Services Commission and the Financial Intelligence Unit proposed the amendments in March. The public notice period runs until May 11, after which the rules will go through further legal and regulatory review.
Yonhap reported that the rules are expected to be finalized around July. Some changes linked to the amended law are set to take effect on August 20, while other provisions may start in phases from January to August next year.
The proposal also seeks clearer checks on overseas virtual asset service providers. DAXA said the rules need more detail because firms need clear standards to decide which foreign platforms carry higher risk.
This point matters because cross-border crypto transfers remain a key focus for Korean regulators. Exchanges must balance compliance demands with fast-moving transfer flows and user activity across global platforms.
Court cases add pressure to AML debate
The debate comes as South Korean exchanges challenge several FIU sanctions in court. A court canceled a three-month partial suspension against Dunamu, the operator of Upbit, after finding gaps in the rules used for the sanction.
Bithumb also received court relief after the Seoul Administrative Court stayed a six-month partial suspension while its case continues. Earlier, the FIU accused Bithumb of customer verification failures and transactions with unregistered overseas exchanges.
Coinone has also faced AML action. In April the FIU decided to fine Coinone 5.2 billion won and impose a three-month partial business suspension over customer verification lapses and transactions with unregistered partners.
