South Korea Tightens Crypto Grip: Expanding FIU Powers Over Unregistered Firms

The South Korean Parliament is poised to grant the Financial Intelligence Unit (FIU) sweeping authority to investigate and sanction unregistered crypto operators, adding a new layer of oversight to the digital asset ecosystem.

New Authority Line: Expanding FIU's Scope

■Individuals will be empowered to report suspected violations.

■FIU can initiate investigations, draft complaints, and collaborate directly with law enforcement.

■Currently, FIU merely flags potential operators; police and other agencies conduct the investigations.

Unregistered Operators in Focus: 2022‑2025 Statistics

■23 of 25 unregistered virtual asset service providers (VASP) referred by the FIU were halted by police.

■Most referrals involved companies based overseas.

■At present, 28 providers are registered; the FIU has forwarded 40 suspected illegal operators to investigative bodies.

Industry Reactions: Where Regulation Meets Innovation

■The FinTech and DeFi ecosystem faces growing pressure for transparency and compliance.

■Investors worry about how regulatory uncertainty in Korea could affect cross‑border trade and liquidity flows.

■Meanwhile, banking and financial authorities view the move as a positive step toward curbing money‑laundering risks.

Future Roadmap: Broadening Regulatory Lines

■The existing law aims to add a new provision to the Act on Reporting and Using Specified Financial Transaction Information.

■Upon passage, the FIU’s powers will accelerate enforcement and sanction processes against non‑compliant operators.

■This shift could elevate transparency and trust in Korea’s crypto market, enhancing its appeal to global investors.

Emre Can: By aligning Korea’s crypto regulatory framework with global standards, this move signals a commitment to risk management and compliance, potentially strengthening market confidence. However, it may also constrain entrepreneurial flexibility for smaller VASPs.