South Korea FIU to Meet Crypto Exchanges After Pushback Over Strict Reporting Rules

Highlights:

• South Korea’s FIU will meet crypto exchanges to discuss controversial new anti-money laundering rules.
• DAXA warns the new reporting rules could increase suspicious transaction reports by 85 times.
• Final crypto rule changes may be confirmed around July after public feedback and cabinet approval.

South Korea’s Financial Intelligence Unit (FIU) is set to meet local crypto exchanges as concerns grow over the country’s planned anti-money laundering (AML) rule changes. According to EDaily on Friday, the meeting will likely take place after the public notice period ends on May 11. The FIU wants to hear directly from exchanges before it finalizes changes to the enforcement decree of the Specific Financial Information Act.

The move follows strong pushback from the local crypto industry. Yonhap News Agency reported on Sunday that the Digital Asset Exchange Alliance, or DAXA, submitted an opinion letter on April 29 through the Ministry of Government Legislation’s public participation system. The letter shared concerns from 27 registered virtual asset service providers, including Upbit, Bithumb, Coinone, Korbit, and Gopax.

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FIU Plans Talks After Crypto Industry Pushback

The FIU said it will meet with exchanges to discuss the proposed rule changes and address market concerns. An FIU official told EDaily that the agency will explain parts of the proposal where the industry may have misunderstandings. The official also said the regulator will reflect necessary feedback and try to move forward with rules that companies can follow and accept. 

The Financial Services Commission (FSC) and FIU proposed the rule changes on March 30. The proposal is part of South Korea’s wider effort to strengthen anti-money laundering controls in the cryptocurrency sector.

The rules focus on virtual asset service providers and their duties when handling transactions linked to overseas platforms and private wallets. Regulators argue that clearer reporting rules are needed because overseas crypto operators and personal wallets do not always follow the same AML standards as domestic companies.

However, exchanges say some parts of the proposal are too strict. The biggest concern is a rule that would require domestic operators to report all crypto transfer transactions worth more than 10 million won when they involve overseas operators or personal wallets. The industry says this could turn many normal transfers into reportable cases and overload compliance teams.

DAXA Warns of Heavy Reporting Burden

DAXA said the new rule could lead to a huge rise in suspicious transaction reports. According to Yonhap, the group estimated that reports from the five major exchanges could jump from 63,408 last year to 5,445,133 if the proposal becomes law. That would be nearly 85 times more than the current number.

Crypto exchanges say this would be very hard to handle in daily operations. They would need more workers, better systems, and faster review teams. Smaller cryptocurrency firms could struggle even more because they do not have the same resources as bigger exchanges.

The FIU, however, said the industry may not fully understand how the rule will work. According to EDaily, the regulator is considering a simpler reporting system than the current suspicious transaction report process. It may ask companies to submit less information in each report. The final method will be decided after the FIU hears directly from exchanges.

The proposed changes are still open for public feedback until May 11. After that, regulators will review the plan through the Regulatory Reform Committee and the Ministry of Government Legislation before sending it for cabinet approval. Yonhap reported that the final rules could be confirmed around July. Some parts may take effect on August 20, while the remaining rules could start gradually between January and August next year.