South Korea's Crypto Sector Faces Regulatory Overhaul

South Korea's cryptocurrency sector is facing a significant challenge as it pushes back against proposed Anti-Money Laundering (AML) rule changes. The rules, which aim to strengthen cross-border AML controls for digital asset transfers, could significantly increase the number of suspicious activity reports (SARs) and overwhelm compliance operations.

The Digital Asset eXchange Alliance (DAXA), an industry body representing 27 registered Virtual Asset Service Providers (VASPs), has submitted formal comments on the Enforcement Decree of the Specific Financial Information Act. The DAXA warns that the proposed rules could lead to a surge in SARs, from around 63,000 filings in the previous year to over 5.4 million, an 85-fold increase.

The industry body argues that this would render practical compliance unworkable, particularly for smaller firms with limited compliance capacity. The DAXA also pushed back against a proposed requirement to verify the accuracy of customer information, arguing that lower-level rules create duties that are not clearly defined in the underlying statute.