South Korea Proposes Sweeping Crypto Overshaul, Aiming to Align Digital Asset Rules with Traditional Banking
South Korean financial authorities are moving to fundamentally reshape the oversight of cryptocurrency transactions, aiming to bring the digital asset market in line with the scrutiny applied to traditional banking.
The country's Financial Intelligence Unit (FIU), which supervises domestic crypto exchanges, has established a dedicated task force. Its mandate is to overhaul anti-money laundering (AML) regulations for digital assets, with a policy proposal expected by mid-2026.
A cornerstone of the expected changes is the potential elimination of the current reporting threshold. Presently, only cryptocurrency transactions exceeding approximately 1 million Korean won (around $700) require disclosure of sender and recipient information. The new framework could mandate this information for all transfers, regardless of size.
"The goal is to establish a regulatory framework that reflects the new crypto market environment," a regulatory official stated, emphasizing an intent to foster safer growth rather than enact a blanket crackdown. The reforms aim to close gaps exploited for sophisticated, cross-border crimes. This move follows incidents like the UK's seizure of over 61,000 Bitcoin linked to a massive investment fraud.
Analysts see this as part of a broader regional trend toward formalization. "South Korea's push mirrors developments in jurisdictions like Hong Kong," says financial policy expert David Chen. "It's a strategic effort to legitimize the sector, protect consumers, and align with international standards like the FATF's Travel Rule, which could ultimately attract more institutional investment."
The task force will also focus on modernizing rules for crypto service providers and strengthening inspections of non-compliant exchanges. Proponents argue that clearer, stronger safeguards can boost public confidence in using digital assets for payments and savings, thereby encouraging responsible innovation in areas like energy-efficient blockchain technologies.
Community Reaction
Ji-hyun Lee, a Seoul-based software developer: "As a regular user, I welcome measures that reduce fraud and scams. If this makes the ecosystem more trustworthy, it's a net positive for long-term adoption, even if it adds a step to transactions."
Marcus Reed, a crypto trader: "This is a classic overreach dressed up as protection. Tracking every single micro-transaction kills the point of peer-to-peer digital cash. It's not 'alignment' with traditional finance; it's the complete colonization of crypto by the same old surveillance systems."
Professor Aisha Kapoor, Fintech Researcher: "The key will be in the implementation. The technology exists for secure, privacy-preserving compliance. If regulators collaborate with the industry to implement smart solutions, they can achieve their security goals without stifling the innovation that makes this space valuable."