South Korea’s Financial Intelligence Unit (FIU) has dialed back its proposed crypto reporting rules, dropping a requirement that would have forced exchanges to automatically flag all overseas transfers above 10 million won (roughly $6,400) as suspicious — regardless of risk. Instead, the amended rule now demands each company operate its own AML risk management system, letting them assess transactions qualitatively. The shift came after a meeting with exchange representatives and industry feedback gathered earlier this week.
Why the FIU backed down
The original proposal didn’t sit well with the industry. The Digital Asset Exchange Joint Council (DAXA) warned that mandatory reporting on all large cross-border transfers could push suspicious transaction reports from 63,408 cases annually to a staggering 5,445,133 — an 85-fold increase. That’s the kind of flood that would drown compliance teams and bury genuine red flags under noise. The FIU listened, and the new language gives firms room to apply their own judgment.
What changes for exchanges
Customer due diligence rules got a similar rethink. Enhanced due diligence is now only required for transactions the exchange deems “particularly high-risk,” not every high-risk or suspicious one. That’s a meaningful carve-out. On the financial side, the FIU granted a one-year grace period on the debt-to-equity ratio requirement for virtual asset business registration, easing the 200% threshold for smaller players. One piece that didn’t budge: the expansion of the travel rule to cover transactions under 1 million won. That stays as originally proposed.
What’s next
The revised bill takes effect August 20 — provided it clears the Ministry of Government Legislation and other agencies. And a separate but related clock is ticking: South Korea’s crypto tax law is set to start in January 2027, after a petition to scrap it gathered enough signatures to force National Assembly debate. For now, the FIU’s decision buys exchanges some breathing room on reporting, but the compliance demands are far from gone.
