South Korea's Crypto Exchanges Resist Tightened AML Rules

Rongchai Wang May 04, 2026 12:36

South Korea's crypto industry warns proposed AML rules could overwhelm exchanges, increasing reports by 85x and complicating compliance.

South Korea's cryptocurrency industry is pushing back against proposed Anti-Money Laundering (AML) rules that could significantly increase compliance burdens for virtual asset service providers (VASPs). The Financial Services Commission (FSC) and Financial Intelligence Unit (FIU) introduced the amendments on March 30, with a public comment period open until May 11. Finalization is expected in July following regulatory review.

The proposed rule would require VASPs to report all international crypto transactions worth over 10 million Korean won (around $6,800) as potentially suspicious, regardless of additional risk factors. According to the Digital Asset eXchange Alliance (DAXA), a trade group representing 27 VASPs, including major exchanges like Upbit, Bithumb, and Coinone, this could result in an 85-fold increase in reporting volumes for South Korea's five largest platforms—from 63,000 reports in 2025 to over 5.4 million annually.

"This scale of reporting makes compliance practically unmanageable," DAXA noted in its formal comments submitted on the proposed changes. The group also raised concerns about requirements to verify customer information, arguing the demands go beyond the scope of the underlying Financial Information Act.

The tension underscores broader friction between South Korea's efforts to tighten AML oversight amid global scrutiny and an industry struggling to adapt to rapidly expanding regulatory demands. The amendments aim to address risks posed by international crypto flows, but exchanges argue the measures could cripple operations.

Legal Challenges Mount Against Existing AML Penalties

The regulatory clash isn't limited to proposed rules. Several major South Korean exchanges are already battling AML-related penalties in court. On April 9, Dunamu, the operator of Upbit, successfully overturned a three-month partial business suspension linked to alleged failures in customer verification and dealings with unregistered overseas VASPs. The FIU, however, appealed the ruling on April 30.

Similarly, Bithumb won temporary relief on April 28 when the Seoul Administrative Court blocked a six-month suspension order while broader legal proceedings continue. Coinone also secured a temporary reprieve after challenging a three-month suspension and a 5.2 billion won fine for alleged AML violations, which included issues with customer verification and transactions involving unregistered offshore platforms.

These legal victories highlight the growing determination of South Korea's crypto industry to resist what it views as excessive regulatory overreach. Yet, with proposed AML rules set for finalization in July, exchanges face mounting pressure to adapt or risk further sanctions.

All eyes are now on the FSC's final decision. If the proposed rules are enacted as is, South Korea's crypto players will need to either overhaul compliance operations or brace for continued legal battles.

• south korea
• crypto regulation
• aml
• vasps