South Korean authorities are facing a significant challenge as the number of suspicious cryptocurrency transactions has skyrocketed in 2025, reaching levels that surpass the combined figures from the previous two years. According to data from the Financial Intelligence Unit (FIU) shared with Representative Jin Sung-joon and supplemented by statistics from the Korea Customs Service (KCS), local Virtual Asset Service Providers (VASPs) submitted a staggering 36,684 suspicious transaction reports (STRs) from January to August 2025.
STRs play a pivotal role in South Korea’s efforts to combat money laundering and other illicit activities. Under the country’s regulations, financial institutions, casinos, and VASPs are mandated to report STRs whenever they suspect that the funds in question may be associated with illegal proceeds, money laundering, or financing of terrorism.
The figures for this year are alarming, as they have already exceeded the STR totals from 2023 and 2024, which reported 16,076 and 19,658 STRs, respectively. In contrast, the years preceding these two saw 199 STRs in 2021 and 10,797 in 2022, highlighting the escalating trend as authorities grapple with rising crime linked to cryptocurrency.
Officials have indicated that a considerable portion of the flagged transactions involved “hwanchigi,” a term for illegal foreign exchange remittances. In these transactions, criminal proceeds are converted into cryptocurrencies via offshore platforms before being funneled into domestic exchanges for cash withdrawal in South Korean won.
From 2021 to August 2025, KCS data shows that up to $7.1 billion worth of crimes related to cryptocurrency have been referred to prosecutors, with approximately $6.4 billion (around 90%) stemming from hwanchigi activities. Notably, customs officials made a significant discovery in May, identifying an underground broker alleged to have used the Tether (USDT) stablecoin to facilitate over $42 million in illegal transfers between South Korea and Russia. Two Russian nationals were implicated in conducting more than 6,000 illicit transactions from January 2023 to July 2024.
Amid these challenges, Representative Jin has urged collaboration among agencies such as the KCS and the FIU to enhance enforcement mechanisms aimed at tracking criminal funds and curbing concealed remittances. He emphasized the need for a systematic approach to combat the evolving nature of foreign exchange crimes linked to cryptocurrencies.
This surge in suspicious transactions in South Korea is reflective of a broader dilemma faced by regulators worldwide. While digital currencies and stablecoins provide speedy and economical payment options, they also open up new avenues for unlawful activities. The European Union has responded to similar concerns through the Markets in Crypto-Assets (MiCA) regulation, which requires issuers to ensure transparency by obtaining licenses. The regulation also places limits on stablecoin transfers, capping them at 1 million transactions per day or a notional value of 200 million euros.
In 2021, European Central Bank policymakers raised the idea of placing restrictions on individual holdings of digital euros to 3,000 euros per person to mitigate unchecked foreign exchange operations. More recently, in 2023, the Bank of England proposed individual caps ranging from 10,000 to 20,000 British pounds for digital pounds, although UK crypto advocates criticized these limits, asserting that such measures are impractical.
As South Korea intensifies its scrutiny over suspicious crypto transactions, the international regulatory landscape continues to evolve in response to the challenges posed by digital assets, emphasizing the need for a robust and cohesive approach to managing cryptocurrency-related risks.
