South Korea crypto industry warns AML rule will swell reports
DAXA calculated a proposed rule to flag overseas crypto transfers of 10 million won or more as suspicious would raise reports from about 63,000 last year to 5.4 million.
An industry group representing 27 registered virtual asset service providers in South Korea warned that a proposed anti-money laundering rule would sharply increase suspicious transaction reports.
The Digital Asset eXchange Alliance (DAXA), which includes the country’s five largest exchanges — Upbit, Bithumb, Coinone, Korbit and Gopax — filed objections to amendments to the Enforcement Decree of the Specific Financial Information Act and related supervisory rules. The Financial Services Commission and the Financial Intelligence Unit proposed the changes on March 30 and opened a public comment period through May 11; regulators expect the rules could be finalized in July after review.
Under the proposal, domestic VASPs that handle transfers with overseas VASPs would have to file suspicious transaction reports for any transfer of 10 million won (about $6,800) or more, regardless of assessed risk. DAXA calculated that applying that threshold across international transfers would raise reports at the five largest exchanges from roughly 63,000 last year to over 5.4 million, an 85-fold increase. The group argued the rise would create practical difficulties for compliance operations.
DAXA also objected to a proposed duty to verify the accuracy of customer information, arguing that lower-level supervisory rules would impose obligations not clearly set out in the underlying law. The alliance warned the combined effect of the reporting threshold and the verification requirement could overwhelm firms’ compliance resources.
Several major exchanges are contesting AML-related sanctions imposed by the Financial Intelligence Unit in administrative court. The operator of Upbit won a first-instance ruling that canceled a three-month partial business suspension tied to alleged customer due diligence failures and transactions with unregistered foreign VASPs; the regulator appealed that decision on April 30. The Seoul Administrative Court temporarily suspended enforcement of a six-month partial suspension against another large exchange while the main case proceeds. Coinone, which faced a three-month partial suspension and a 5.2 billion won fine over alleged AML lapses, obtained a temporary reprieve after challenging its penalties.
Regulators have cited alleged failures including inadequate customer verification and dealings with unregistered overseas virtual asset service providers when imposing sanctions. Industry representatives contend the proposed reporting threshold and additional verification duties would expand compliance obligations in practice and could divert resources from higher-risk monitoring.
The public comment period runs through May 11 and regulators plan a final review ahead of a potential July finalization.
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