South Korea Crypto Industry Pushes Back on AML Rule

South Korea’s crypto industry has reportedly warned that proposed Anti-Money Laundering (AML) rule changes could create operational confusion by forcing virtual asset service providers (VASPs) to report all overseas-linked virtual asset transfers worth 10 million Korean won (about $6,800) or more as suspicious transactions.

According to a Yonhap News report on Sunday, the Digital Asset eXchange Alliance (DAXA), an industry body representing South Korean exchanges, submitted comments on the proposed changes to the Enforcement Decree of the Specific Financial Information Act and related supervisory rules. The comments reflected the views of 27 registered VASPs, including the country’s five major exchanges: Upbit, Bithumb, Coinone, Korbit and Gopax.

DAXA said the proposal could increase suspicious transaction reports from South Korea’s five largest exchanges by 85 times, from about 63,000 cases last year to over 5.4 million, making compliance difficult in practice. The group also objected to a proposed requirement to verify the accuracy of customer information, arguing that lower-level rules add obligations not clearly set out in the underlying law. 

The pushback highlights growing tension between South Korea’s effort to tighten crypto AML oversight and the industry’s concern that compliance rules are being expanded beyond what exchanges can reasonably process. 

The Financial Services Commission (FSC) and the Financial Intelligence Unit (FIU) proposed the amendments on March 30, opening a public notice period through May 11. Under the proposal, domestic VASPs conducting virtual asset transfers with overseas VASPs would have to report transactions of 10 million won or more as suspicious regardless of risk level. The rules are expected to be finalized in July after regulatory and legal review.

Related: South Korea tightens crypto withdrawal-delay exemptions after scam losses

Courts halt FIU’s AML sanctions on major exchanges

The industry pushback comes as South Korean exchanges are already challenging AML-related sanctions imposed by the Financial Intelligence Unit in court. 

On April 9, Upbit operator Dunamu won a first-instance ruling canceling a three-month partial business suspension tied to alleged violations involving customer due diligence and transactions with unregistered foreign virtual asset service providers. However, the regulator appealed the decision on April 30, according to Yonhap.

On Friday, crypto exchange Bithumb also received court relief after the Seoul Administrative Court suspended enforcement of a six-month partial business suspension until the main case is decided. The FIU imposed the sanction after an inspection found alleged violations of South Korea’s Financial Information Act, including failures tied to transactions with unregistered VASPs.

Coinone, which received a three-month partial business suspension and a 5.2 billion won fine over alleged AML failures, also received a temporary reprieve after challenging the sanctions. Local reports said the case involved customer verification issues and transactions with unregistered overseas virtual asset service providers.

Magazine: AI-driven hacks could kill DeFi — unless projects act now

Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently.