South Korea has taken action against unregistered virtual asset service providers (VASPs). According to reports, the Financial Intelligence Unit (FIU) reported about 40 of them to the police, an indication of increasing efforts of Seoul to crack down on unauthorized crypto operations. The development also adds pressure on foreign exchanges targeting users in South Korea.
This development happened amid the push made by South Korea to urge the Financial Action Task Force (FATF) to tighten international crypto regulations for all countries that belong to the group, making the domestic action part of a broader campaign that could reshape compliance costs for exchanges worldwide. According to the law on Specified Financial Transaction Information, all platforms carrying out their crypto operations within the country should be certified through the Information Security Management System (ISMS) and registered with the FIU.
The same rule applies to all foreign firms providing services to citizens of South Korea. There are only 28 organizations that have fulfilled these criteria, as stated by Chosun Ilbo. Every other provider offering services to domestic customers is operating illegally. The FIU outlined several evasion tactics it uncovered during its review. Some offshore platforms ran Korean-language marketing campaigns on Telegram and KakaoTalk to recruit local users, then routed customer support through English-only channels to obscure the fact that they were doing business inside the country.
South Korea cracks down on 40 illegal VASPs
According to the authorities in South Korea, private money changers were also found converting stablecoins into won for international students, tourists, and foreign workers residing in South Korea. In other cases, YouTubers accepted fixed payments from overseas exchanges to promote their platforms to Korean audiences. Those not registered under the existing system are not covered by the Virtual Asset User Protection Act and the Specified Financial Transaction Information Act.
Consequently, these platforms make users susceptible to data breaches, hack attacks, loss of funds, and exit scams without much chance of getting their losses back, based on the FIU’s investigation. The timing of this news is no coincidence. FIU Director Lee Hyung-joo had just attended the 34th FATF plenary session in Paris, where he made an appeal to all member countries to remove any transaction threshold amount from the crypto Travel Rule. In fact, South Korea intends to apply the identity verification process to all transactions regardless of their value by reducing the current 1 million won ($730) threshold to zero in August.
Lee said that having different rules for licensing and supervising exchanges in different jurisdictions leads to regulatory arbitrage, which hampers the effectiveness of anti-money laundering (AML) and counter-terrorism financing efforts. In case other members of FATF follow suit with Seoul, then all the world’s exchanges will have to have the necessary infrastructure for carrying out ID checks on micropayments, a costly operational shift.
The preliminary review conducted by the FATF confirmed Seoul’s position: jurisdictions where most virtual asset trades take place are least compliant with FATF’s AML standards for crypto. The referrals become another addition to a series of enforcement actions conducted in 2026. As reported by Compliance Corylated, in January, the Financial Services Commission brought a criminal case for the violation of the Virtual Asset User Protection Act against an individual who was reportedly running a pump-and-dump scheme.
The suspect made a profit from rapidly buying up certain tokens and then dumping his holdings within minutes; this way, he earned several hundred million won within one month. As part of an accord signed in March by South Korean officials, the Financial Supervisory Service, Korea Customs Service, and nine credit card issuers agreed to coordinate the exchange of transaction data in real-time and stop the illegal exchange of money using overseas credit cards, as reported by Cryptopolitan.
