South Korean lawmakers have proposed giving the Financial Intelligence Unit direct power to investigate unregistered crypto businesses, instead of relying mainly on police referrals. The bill comes after police suspended investigations into 23 of 25 unregistered operators the FIU referred between August 2022 and August 2025.
People Power Party lawmaker Eom Tae-young and nine other lawmakers filed an amendment on Thursday to the Specific Financial Information Act, Yonhap reported. The bill would let the FIU investigate and analyze suspected violations itself, rather than depending on police to pursue most cases.
Under the proposal, any person could report a suspected violation directly to the FIU. The agency could then file complaints with relevant authorities, request criminal investigations, and hand over information gathered during its review. The bill has only been introduced and must pass the National Assembly before it can take effect.
Police dropped most FIU referrals
Lawmakers proposed the additional powers after enforcement data raised questions about how effectively cases involving overseas crypto operators were pursued once they left the FIU. According to Yonhap, police suspended investigations or preliminary inquiries into 23 of the 25 unregistered virtual asset service providers the FIU referred between August 2022 and August 2025.
The companies and people connected to the cases were reportedly located outside South Korea, making investigations harder for domestic law enforcement. Giving the FIU investigative powers at an earlier stage would let the agency that first identifies suspected violations collect information before a case moves to another authority.
Dozens of unregistered operators remain active
South Korea requires companies providing crypto services to its residents to register with the FIU, including foreign firms actively serving South Korean customers. As crypto.news previously reported, the FIU said in June that only 28 virtual asset service providers were registered at the time. About 40 suspected illegal operators had been referred to investigative authorities.
Some overseas operators recruited customers through Telegram and KakaoTalk chat rooms while offering English-language customer service, a setup regulators said could make their activities in the country less obvious. Others sold stablecoins and other assets to international students, tourists and foreign workers seeking transactions without disclosing their identities, and promoters were paid to advertise foreign crypto services on YouTube and Telegram.
The FIU warned that customers using unregistered services could face fraud, hacking and personal data leaks, and could struggle to recover funds if an operator failed to deliver purchased assets. Money laundering has also remained a concern, as unauthorized platforms could be used to conceal criminal proceeds or avoid checks applied to registered firms.
Registered exchanges face their own tightening rules
Regulatory attention has not been limited to unregistered firms. Domestic exchanges have faced their own scrutiny. Earlier this year, they objected to a proposal requiring them to report overseas-linked transfers worth at least 10 million won as suspicious transactions. The Digital Asset Exchange Alliance estimated the rule could push annual suspicious transaction reports at Upbit, Bithumb, Coinone, Korbit and Gopax from about 63,000 to more than 5.4 million.
Enforcement under the same law has already triggered court challenges. In April, a Seoul court overturned a three-month partial suspension on Dunamu, the operator of Upbit, after the FIU alleged 44,948 transactions involving 19 unregistered overseas platforms. Bithumb separately secured a court stay against a six-month partial suspension over customer verification failures and dealings with unregistered foreign companies, while Coinone obtained temporary court relief from enforcement measures connected to anti-money laundering and customer verification requirements.
Under separate amendments to the Foreign Exchange Transactions Act, companies handling cross-border virtual asset transfers will have to register with the Ministry of Economy and Finance once the framework takes effect in December.
Source: crypto.news
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