South Korea Proposes New Legislation Empowering FIU to Investigate Unregistered Crypto Businesses Directly

South Korean Lawmakers Push for Enhanced Crypto Regulation with New FIU Powers

Seoul, South Korea — In a significant move to bolster the regulation of the burgeoning cryptocurrency sector, South Korean lawmakers have introduced legislation aimed at empowering the Financial Intelligence Unit (FIU) with direct investigative authority over unregistered crypto businesses. This initiative seeks to streamline the enforcement process and address the growing concerns surrounding illegal crypto operations in the country.

The proposed amendment, filed by People Power Party lawmaker Eom Tae-young and nine co-sponsors, aims to amend the Act on Reporting and Using Specified Financial Transaction Information, commonly known as the Specific Financial Information Act. If passed, the FIU would gain the ability to analyze suspected violations, file complaints, and request criminal investigations without relying solely on police referrals.

Currently, the FIU has identified 40 suspected illegal operators, yet police have suspended inquiries into 23 of the 25 unregistered crypto operators referred by the FIU between August 2022 and August 2025. This has raised questions about the effectiveness of current enforcement measures, particularly as many of these operators are based overseas, complicating investigations.

Under the new legislation, individuals would be able to report suspected violations directly to the FIU, which would then have the authority to investigate and analyze the reported conduct. This proactive approach aims to empower the FIU to act swiftly and decisively in cases of suspected registration violations.

The FIU has previously warned that unregistered foreign crypto businesses are increasingly targeting South Korean customers through platforms like Telegram and KakaoTalk, often obscuring their operations. These businesses have been known to facilitate transactions without proper oversight, exposing users to risks such as fraud, hacking, and personal data breaches.

In addition to the proposed changes for the FIU, South Korea has been tightening its anti-money laundering (AML) regulations for registered exchanges. Earlier this year, domestic exchanges raised concerns over new rules requiring them to report overseas-linked crypto transfers exceeding 10 million won as suspicious transactions. The Digital Asset Exchange Alliance (DAXA) argued that this could lead to an overwhelming number of reports, complicating the regulatory landscape further.

As the crypto market continues to evolve, the South Korean government is also preparing to implement new regulations for cross-border virtual asset transfers. Under amendments to the Foreign Exchange Transactions Act, companies handling such transfers will need to register with the Ministry of Economy and Finance starting in December.

The introduction of this legislation marks a pivotal moment in South Korea’s approach to cryptocurrency regulation, reflecting a growing recognition of the need for robust oversight in a rapidly changing financial landscape. The bill must now pass through the National Assembly before any changes can take effect, but its introduction signals a clear intent to enhance regulatory frameworks and protect consumers in the digital asset space.