South Korea moves to let regulators chase crypto firms directly

A group of South Korean lawmakers introduced a bill to expand the Financial Intelligence Unit's authority over unregistered crypto firms, Cointelegraph reported. People Power Party lawmaker Eom Tae-young and nine co-sponsors filed the bill on Thursday to add a new provision to the Act on Reporting and Using Specified Financial Transaction Information, the law governing how the FIU tracks financial activity.

The provision would let anyone report a suspected violation directly to the FIU. From there, the agency could investigate and analyze the allegation, file complaints with relevant authorities, request a criminal investigation, or hand information to investigators itself. The bill sits at the introduction stage and needs to clear the National Assembly before it can amend the existing law.

The bill targets a specific enforcement gap. Under the current system, the FIU can identify a suspected unregistered operator, but it has to rely on police and other authorities to pursue the case. That handoff hasn't worked well: police suspended investigations or preliminary inquiries into 23 of the 25 unregistered virtual asset service providers the FIU referred between August 2022 and August 2025, according to Yonhap. Most of the companies and individuals involved were reportedly based overseas, outside the reach of a domestic police probe that never got past its early stages. A referral rate that lopsided suggests the bottleneck sits less with the FIU's ability to spot a violator and more with what happens to a case once it leaves the agency and lands on a desk that has to weigh it against every other open investigation on the books.

• Bill sponsors: Eom Tae-young plus 9 co-sponsors, People Power Party
• Unregistered VASP cases referred by FIU (Aug 2022 to Aug 2025): 25
• Of those, cases where police suspended the investigation: 23
• Crypto providers currently registered with the FIU: 28
• Suspected illegal operators referred to investigators as of June: 40

Crypto companies serving South Korean customers already have to register with the FIU, and the regulator said in June that 28 providers held valid registration while it had referred 40 suspected illegal operators to investigative authorities. The gap between the number flagged and the number prosecuted is what this bill is built to close, by giving the FIU a more direct route to law enforcement instead of a handoff that has repeatedly stalled once a case leaves the agency's hands.

The bill lands alongside a broader tightening of South Korea's crypto oversight this year, including a lowered threshold for Travel Rule compliance on crypto transfers that already brought smaller transactions under the same reporting requirements previously reserved for larger ones. Together, the two moves point in the same direction: regulators asking for information on more of the market at a lower dollar threshold, and asking for a shorter path between spotting a violation and someone facing consequences for it. Neither change does much on its own for an operator that's already registered and compliant. For one that isn't, and is counting on a slow, multi-agency handoff to run out the clock, the calculation gets less favorable with each bill like this one.

This article is for informational purposes only and does not constitute investment advice.