In 2025, South Korean authorities have flagged an unprecedented volume of suspicious cryptocurrency transactions, signaling a growing concern about illicit financial activities within the sector. The data indicates that the total number of suspicious transaction reports (STRs) has already surpassed the combined figures from the previous two years.
According to the Financial Intelligence Unit (FIU) and statistics from the Korea Customs Service (KCS), there have been 36,684 STRs filed by local virtual asset service providers (VASPs) between January and August of this year. This figure significantly exceeds the STR totals from 2023, which stood at 16,076, and from 2024, which reached 19,658. Notably, the current volume also far surpasses earlier years, including just 199 STRs in 2021 and 10,797 in 2022.
South Korea employs STR filings as one of its central tools to combat money laundering and other financial crimes. Under national legislation, financial institutions, casinos, and VASPs are required to submit these reports when they suspect that funds are tied to illegal activities, including money laundering and terrorism financing.
The rise in STRs has drawn attention to the types of activities involved, particularly those connected to “hwanchigi,” a term that describes illegal foreign remittances. In these schemes, criminal proceeds are often converted into cryptocurrency on offshore exchanges, which are then moved to domestic platforms and liquidated in South Korean won.
Since 2021, the KCS has referred $7.1 billion worth of crypto-related criminal activities to prosecutors, with an alarming $6.4 billion—approximately 90%—linked to hwanchigi operations. A notable case emerged in May when customs authorities uncovered a broker involved in transferring around $42 million illegally between South Korea and Russia using Tether (USDT) stablecoin. This operation reportedly involved two Russian nationals conducting over 6,000 illegal transactions between early 2023 and mid-2024.
In light of these developments, Representative Jin Sung-joon has called upon regulatory bodies such as the KCS and the FIU to enhance their monitoring and enforcement measures. Jin emphasized the necessity for systematic strategies to counteract emerging forms of foreign exchange-related crimes.
This surge in suspicious transactions in South Korea reflects a larger global regulatory challenge. While stablecoins and digital currencies can facilitate quicker and more cost-effective payment methods, they also provide potential avenues for fraudulent activities.
In response to similar concerns, the European Union has introduced its Markets in Crypto-Assets (MiCA) regulation, aimed at mitigating the risks associated with illicit cross-border transactions through mandatory licensing for issuers to promote transparency. Furthermore, MiCA imposes restrictions, limiting stablecoin transfers to either 1 million transactions per day or a combined notional value of 200 million euros.
Similarly, discussions have taken place within the European Central Bank regarding limitations on digital euro holdings, proposing a cap of 3,000 euros per individual to help curb unregulated foreign exchange operations. The Bank of England has also explored limiting individual digital pound holdings between 10,000 and 20,000 British pounds, though the practicality of such measures has been questioned by UK crypto advocates.
As South Korean regulators strive to implement effective oversight in the rapidly evolving cryptocurrency landscape, the implications of their actions will not only shape the local market but also resonate across the global regulatory framework as authorities grapple with balancing innovation and security in the digital age.
