South Korean lawmakers have introduced legislation that would give the Financial Intelligence Unit direct authority to investigate suspected unregistered crypto businesses instead of relying mainly on police referrals.
Summary
- South Korean lawmakers have proposed giving the FIU direct powers to investigate unregistered crypto businesses.
- The FIU could analyze suspected violations, file complaints and request criminal investigations under the bill.
- Police suspended inquiries into 23 of 25 unregistered crypto operators referred by the FIU between August 2022 and August 2025.
- The FIU said in June that 28 crypto providers were registered and 40 suspected illegal operators had been referred to authorities.
Yonhap reported that People Power Party lawmaker Eom Tae-young and nine other lawmakers filed the amendment on Thursday, proposing new powers under the Act on Reporting and Using Specified Financial Transaction Information, commonly known as the Specific Financial Information Act.
Under the bill, any person could report a suspected violation of the law directly to the FIU. Once a report is received, the financial intelligence agency would be allowed to investigate and analyze the suspected conduct before deciding whether further action is required.
The proposal would also allow the FIU to file complaints with relevant authorities, request criminal investigations, and hand information gathered during its review to investigators. Such powers would change the current process, under which the FIU can identify suspected unregistered operators but must depend on police and other investigative agencies to pursue most cases.
The bill has only been introduced and must pass the National Assembly before the proposed changes can take effect.
FIU could directly investigate unregistered crypto businesses
Lawmakers proposed the additional powers after enforcement data raised questions over how effectively cases involving overseas crypto operators were being pursued once they left the FIU.
According to Yonhap, police suspended investigations or preliminary inquiries into 23 of the 25 unregistered virtual asset service providers referred by the FIU between August 2022 and August 2025.
The companies and people connected to the cases were reportedly located outside South Korea, making investigations more difficult for domestic law enforcement agencies.
Giving the FIU investigative and analytical powers at an earlier stage would allow the agency that first identifies suspected registration violations to collect information before a case moves to another authority.
South Korea requires companies providing virtual asset services to residents of the country to register with the FIU, including foreign companies that actively serve South Korean customers.
As crypto.news previously reported, the FIU said in June that only 28 virtual asset service providers were registered at the time, while about 40 suspected illegal operators had been referred to investigative authorities.
The regulator said foreign businesses must follow the same registration requirements when they provide services to South Korean residents. Companies seeking registration must also meet local compliance requirements, including Information Security Management System certification.
Overseas operators have remained a key FIU enforcement problem
The FIU’s June enforcement warning provided details on how some unregistered foreign crypto businesses were reaching South Korean customers while attempting to limit their visible presence in the country.
According to the agency, some overseas operators recruited customers through Telegram and KakaoTalk open chat rooms while offering customer service in English, a setup regulators said could make their domestic activities less obvious.
Authorities also identified private currency exchange businesses selling stablecoins and other virtual assets to international students, tourists, foreign workers and people seeking transactions without disclosing their identities.
Some operators exchanged digital assets directly for Korean won or other fiat currencies, while promoters were paid to advertise foreign crypto services through YouTube channels, Telegram groups and online communities, the FIU said.
The agency warned that customers using unregistered services could face exposure to fraud, hacking and personal data leaks. Because such businesses operate outside the registered system, the FIU also said users could have difficulty recovering funds when an operator failed to deliver purchased assets.
Money laundering has remained another concern for regulators. The FIU said unauthorized crypto platforms and private exchange services could be used to conceal criminal proceeds or facilitate transfers that avoid standard checks applied by registered financial firms.
The newly introduced bill would allow the agency to pursue suspected violations of the Specific Financial Information Act itself before requesting assistance from another investigative body.
South Korea has tightened AML rules for registered exchanges too
Regulatory attention has not been limited to companies operating without registration.
Earlier this year, domestic exchanges objected to proposed changes that would require them to report overseas-linked crypto transfers worth at least 10 million won as suspicious transactions.
A May regulatory proposal drew objections from the Digital Asset Exchange Alliance, which represents registered virtual asset service providers in South Korea.
DAXA estimated that the rule could increase annual suspicious transaction reports at Upbit, Bithumb, Coinone, Korbit and Gopax from about 63,000 to more than 5.4 million.
The association argued that applying an automatic monetary threshold could cause large numbers of ordinary overseas transfers to be reported regardless of the risk attached to the customer or counterparty.
The dispute also involved the treatment of foreign platforms. Regulators have sought stricter controls on transactions involving overseas virtual asset service providers, while local exchanges have asked authorities for clearer standards for determining which foreign businesses should be treated as high risk.
Enforcement decisions under the same financial information law have already produced court challenges. In April, a Seoul court overturned a three-month partial suspension imposed on Dunamu, the operator of Upbit, after the FIU alleged 44,948 transactions involving 19 unregistered overseas platforms.
Bithumb separately secured a court stay against a six-month partial suspension after regulators accused it of customer verification failures and dealings with unregistered foreign companies. Coinone also obtained temporary court relief from enforcement measures connected to anti-money laundering and customer verification requirements.
Cross-border crypto transfers face separate registration rules
South Korea has also created another regulatory route for businesses moving digital assets across national borders.
Under amendments to the Foreign Exchange Transactions Act, companies handling cross-border virtual asset transfers will have to register with the Ministry of Economy and Finance when the framework takes effect in December.
A June licensing report detailed how authorities were preparing enforcement regulations that could allow eligible fintech companies, alongside crypto businesses, to provide blockchain-based cross-border remittance and foreign exchange services.
The South Korean government promulgated the revised law on June 2 with a six-month grace period. Once implemented, virtual asset transfers involving South Korea and another country will fall under the country’s regulated foreign exchange system.
Companies seeking to provide the service will need to register with the finance ministry and report qualifying overseas transfers through the Bank of Korea’s foreign exchange reporting network.
Authorities have said crypto transfers previously operating outside the formal foreign exchange reporting system created risks involving illicit foreign exchange transactions and money laundering.
Applicants under the new framework must first complete virtual asset service provider registration, connect their systems to institutions responsible for transmitting foreign exchange and digital asset transaction data, and satisfy additional requirements covering facilities and qualified personnel.
