South Korean regulators are floating a set of anti-money laundering rules that would force crypto exchanges to file 85 times more transaction reports than they do today — a move that industry insiders warn could overwhelm compliance systems and drive up costs.
The 85x leap
The proposed amendments to South Korea’s AML framework would require exchanges to report virtually all suspicious transactions, not just the large or cross-border ones currently monitored. Under the new regime, every flagged trade, wallet interaction, or withdrawal pattern would need to be documented and submitted to the Korea Financial Intelligence Unit (KoFIU).
That’s a jump from roughly 12,000 reports a year per exchange to more than a million, according to estimates from local compliance consultants. The 85-times multiplier isn’t a typo — it’s the core of the proposal, and it’s got exchanges scrambling to figure out how they’d staff up.
Why now?
South Korea has been tightening its crypto oversight since the 2022 Terra collapse and the more recent wave of phishing scams that drained billions from retail investors. The Financial Services Commission has made clear it wants crypto to operate under the same suspicious-transaction reporting standard as traditional banks — but banks have decades-old compliance infrastructure and armies of analysts. Exchanges don’t.
The timing isn’t great. Many Korean exchanges are still recovering from the 2025 bear market. Trading volumes are thin, and several smaller platforms already run on razor margins. A 85-fold reporting increase could force them to hire dozens of new compliance staff or license expensive automated screening software — or simply shut down.
The compliance bottleneck
Even the larger exchanges, like Upbit and Bithumb, are worried about the operational strain. Their compliance teams currently handle a few hundred thousand reports a year. Jumping to millions would require a complete overhaul of internal systems, including real-time transaction monitoring, AI-based risk scoring, and integration with KoFIU’s submission portal — none of which is cheap or quick.
One common concern: false positives. If the rules are too broad, exchanges could end up flooding regulators with low-quality alerts, burying both sides in noise. That defeats the purpose of AML enforcement.
What comes next
The proposal is still in draft form. A public comment period runs through mid-June, and the Financial Services Commission is expected to publish a final version by September. Industry groups are lobbying hard for a phased rollout — maybe a 10x increase first, then a gradual scale-up — but so far regulators haven’t budged.
If the rules pass as written, exchanges will have about six months to comply. For the ones that can’t, the choice may be stark: merge with a bigger player, pivot to a non-Korean license, or close doors. South Korea’s crypto landscape is about to get a lot smaller — or a lot more expensive.
