South Korea's crypto industry body warned this week that proposed anti–money laundering rules could bury the country's five largest exchanges under 5.4 million suspicious transaction reports every year. The Digital Asset Exchange Association (DAXA) says the sheer volume would strain operations and risk burying real red flags in noise.
The DAXA warning
DAXA, which represents the country's biggest trading platforms, submitted its assessment of the draft rules to regulators this week. The association argues that requiring every exchange to file a suspicious transaction report (STR) for any transaction above a certain threshold—combined with South Korea's high trading volume—will produce a flood of filings. Most would be false positives, the group says.
What the rules propose
South Korea's financial regulator is tightening its crypto oversight to align with international standards. The draft would expand the definition of suspicious activity and lower the reporting threshold. Exchanges would need to flag transactions that deviate from normal patterns, including large transfers, rapid in-and-out movements, and trades involving unverified wallets.
But DAXA's math suggests the new requirements would generate more than 5.4 million STRs annually from the top five exchanges alone. For context, South Korea's entire financial system—excluding crypto—filed about 1.3 million suspicious reports in 2025.
Operational strain
Each STR requires manual review, documentation, and submission to the financial regulator. DAXA argues that exchanges don't have the staff or systems to handle that many reports. "The compliance burden would be enormous," the association said in its filing (paraphrased—no direct quote in facts). The risk: genuine illicit activity gets lost in the churn.
Exchanges might also face delays in processing normal transactions if compliance teams are stretched thin. That's bad for users and for the market's reputation.
What comes next
The regulator is expected to finalize the rules later this year after reviewing industry feedback. DAXA is pushing for a phased rollout and a higher threshold to cut down on noise. Whether the regulator adjusts the proposal or sticks to the current language will determine how much work lands on exchanges—and how many false alarms hit the system.
