South Korea drops its toughest crypto reporting rule

South Korea's financial regulator has pulled back from what would have been one of the most sweeping crypto compliance mandates in the country's history, scrapping a plan to make every cross-border transfer above 10 million won (roughly $7,000) automatically reportable as a suspicious transaction.

What the rule would have required

The proposal, published by the Financial Services Commission (FSC) as a draft amendment on March 30, 2026, would have required domestic virtual asset service providers to file suspicious transaction reports (STRs) for any transfer above 10 million won sent to an overseas exchange or personal wallet, regardless of whether there were any actual grounds for suspicion. The public comment period ran from March 30 to May 11, 2026.

The Digital Asset eXchange Alliance (DAXA), which represents South Korea's five largest exchanges including Upbit, Bithumb, Coinone, Korbit, and Gopax, pushed back hard. The alliance estimated that annual STR filings across the five major platforms would jump from roughly 63,408 to more than 5.4 million, an increase of approximately 85 times. DAXA argued the rule would effectively turn exchanges into data-entry operations, forcing mechanical reporting based purely on a value threshold rather than genuine risk assessment.

FIU reverses course after exchange CEO meetings

After meeting directly with crypto exchange chief executives to gather industry opinions, the Korea Financial Intelligence Unit (FIU) accepted that the burden was excessive and withdrew the plan. Under the revised approach, each firm will instead be required to build and operate its own internal anti-money laundering risk management system, making qualitative judgments about which transactions are genuinely suspicious.

An FIU official was quoted by Seoul Economic Daily explaining the thinking: "If only the amount is used as the standard, companies will report uniformly without judging risk. We will have each firm operate its own management system so that it can make qualitative assessments of risky transactions."

The revised amendments are expected to take effect on August 20 following review by the Ministry of Government Legislation. Not everything is being eased, however. The FIU confirmed it will press ahead with expanding the travel rule, removing the existing 1 million won minimum threshold so that exchanges must collect and share sender and receiver identity data on all transfers, regardless of size. Enhanced customer verification will now apply only to transactions assessed as particularly high-risk, rather than all cases flagged as suspicious.

The climbdown marks a notable shift in tone between Seoul's crypto regulators and the domestic exchange industry, which has also been winning court battles against earlier FIU sanctions in recent months.

Sources:
Seoul Economic Daily: Korea Drops Blanket Reporting Rule for Crypto Transfers
Cointelegraph: South Korea Crypto Industry Pushes Back on AML Rule
Crypto Times: South Korea's FIU to Meet Crypto Exchanges Amid Push to Ease Rules