South Korea Seeks Enhanced FIU Powers to Tackle Unregistered Crypto Firms

South Korea Seeks Enhanced FIU Powers to Tackle Unregistered Crypto Firms

South Korean lawmakers have proposed legislation aimed at empowering the Financial Intelligence Unit (FIU) with direct authority to probe suspected unregistered cryptocurrency businesses. This move comes in response to ongoing challenges in regulating the cryptocurrency sector effectively.

Proposed Legislative Changes

The new bill, introduced by People Power Party lawmaker Eom Tae-young alongside nine other legislators, seeks to amend the Specific Financial Information Act. If passed, the legislation would grant the FIU the ability to investigate potential violations, file complaints, and request criminal investigations without having to rely predominantly on police referrals.

Current Limitations on Investigations

Recent data revealed that police had suspended inquiries into 23 out of 25 unregistered crypto operators referred by the FIU between August 2022 and August 2025. With most of these operators reportedly based outside South Korea, the lack of direct investigative powers has hindered effective law enforcement in these cases.

Enhanced Reporting Mechanisms

The proposed legislation would enable individuals to report suspected violations directly to the FIU. Upon receiving such reports, the FIU is expected to conduct its own investigations and analyses before determining if further action is warranted. This proactive approach aims to streamline the reporting and investigation process for unregistered crypto entities.

Challenges from Overseas Operators

Many of the unregistered operators fall outside the jurisdiction of South Korean law enforcement, complicating investigations. The FIU warned that some foreign businesses have been targeting South Korean customers through privacy-conscious methods, such as utilizing platforms like Telegram and KakaoTalk.

Risks Associated with Unregistered Services

The FIU has cautioned that customers of these unregistered services may face increased risk of fraud, hacking, and difficulty in recovering funds. The agency has underscored that unregulated crypto platforms could potentially serve as avenues for money laundering and other illicit activities.

Future of Amendment and Legislative Process

This legislation has been introduced but must be passed by the National Assembly before implementation. Should it advance, the FIU will gain significant authority to address registration violations, marking a shift in how unregistered crypto businesses are managed in South Korea.