AML COMPLIANCE MANDATORY FOR FOREIGN CRYPTO EXCHANGES, SAYS KOREAN REGULATOR

Last updated: June 19, 2025, 23:28 | Written by: Elizabeth Rossiello

South Korea, a nation known for its fervent embrace of cryptocurrency, is tightening its regulatory grip on the digital asset landscape.In a move signaling a commitment to combating financial crime and fostering a safer crypto environment, the Korean regulator, the Financial Services Commission (FSC), has declared that Anti-Money Laundering (AML) compliance is now mandatory for foreign crypto exchanges that deal in the Korean won.This decisive action, spearheaded by FSC Chairman Eun Sung-soo, underscores South Korea's determination to maintain strict oversight, not just within its borders, but also extending to overseas entities engaging with the local currency. Eun Sung-soo, chairman of South Korea s Financial Services Commission (FSC), has said that foreign crypto exchanges that deal in the Korean won must comply with the country s Anti-Money Laundering standards. According to The Korea Herald on Tuesday, Eun made these comments while fielding questions from lawmakers about the FSC s plans to regulate crypto exchange giant Binance.The implications of this new mandate are far-reaching, potentially reshaping the dynamics of the Korean crypto market and impacting global exchanges seeking access to its lucrative user base.

This regulatory shift isn't just about ticking boxes; it's a proactive response to the increasing sophistication of crypto-related financial crimes.By extending AML obligations to foreign exchanges, South Korea aims to mitigate risks associated with money laundering, terrorist financing, and other illicit activities that can exploit the anonymity and cross-border nature of cryptocurrencies. Eun Sung-soo, chairman of South Korea s Financial Services Commission (FSC), said that foreign crypto exchanges that deal in the Korean won must comply with the country s Anti-Money LaunderingThe FSC's move also intends to address the so-called ""Kimchi Premium,"" a price discrepancy where cryptocurrencies trade at higher values on Korean exchanges due to limited foreign participation and regulatory barriers. crypto markets; eth-bch vs btc; bitcoin price; ethereum price; cardano (ada) price; solana (sol) price; ripple (xrp) price; polkadot (dot) price; dogecoin (doge) price;Ultimately, this new AML mandate is a crucial step towards integrating cryptocurrency into the mainstream financial system while safeguarding its integrity.

Understanding the New AML Requirements for Foreign Crypto Exchanges

The FSC's announcement clarifies that any foreign crypto exchange facilitating trading pairs involving the Korean won (KRW) must adhere to South Korea's stringent AML regulations. South is strengthening AML regulations to tackle growing crypto-related crimes. The FIU convened a meeting discuss the possible measures to mitigate crypto threats. The regulator is planning to establish a 'People's Livelihood Crime AML Joint Response Team.' South Korea s Financial IntelligenceThis isn't simply a suggestion; it's a legal obligation that carries significant consequences for non-compliance. BTCUSD Bitcoin AML compliance mandatory for foreign crypto exchanges, says Korean regulatorSo, what exactly does this entail?

Here's a breakdown of the key requirements:

Registration with the Korea Financial Intelligence Unit (KoFIU): Foreign exchanges must register with the KoFIU, the FSC's AML watchdog. AML compliance mandatory for foreign crypto exchanges, says Korean regulator PANews ｜ 3:07 South Korea s strict crypto regulatory oversight is now extending to overseas exchanges that offer cryptocurrency trading services denominated in the country s currency.This registration process involves providing detailed information about the exchange's operations, ownership structure, and AML compliance program.
Implementation of robust KYC procedures: Know Your Customer (KYC) procedures are essential for verifying the identity of users. South Korean Regulator says AML compliance is mandatory for foreign crypto exchanges offering services in the country s KRW currency.Exchanges must collect and verify information such as government-issued IDs, proof of address, and other relevant documentation. AML compliance mandatory for foreign crypto exchanges, says Korean regulatorThis helps prevent the creation of anonymous accounts used for illicit purposes.
Transaction monitoring and reporting: Exchanges must implement systems to monitor transactions for suspicious activity. Strict KYC rules limit foreign access, but AML reforms could ease restrictions. FIU strengthens AML enforcement, blocking unregistered crypto exchanges. South Korea is currently in the process of opening its cryptocurrency markets to foreign investors, provided that exchanges operating in the country have implemented anti-money laundering (AMLThis includes identifying patterns indicative of money laundering, such as large transactions, frequent deposits and withdrawals, and transactions involving high-risk jurisdictions.Suspicious transactions must be reported to the KoFIU.
Compliance with the Travel Rule: The Travel Rule requires exchanges to collect and transmit originator and beneficiary information for virtual asset transfers exceeding a certain threshold. Eun Sung-soo, chairman of South Korea s Financial Services Commission (FSC), has said that foreign crypto exchanges that deal in the Korean won must c JavaScript seems to be disabled in your browser.This helps trace the flow of funds and prevent money laundering across different platforms.
Designation of an AML compliance officer: Exchanges must appoint a dedicated AML compliance officer responsible for overseeing the implementation and enforcement of the AML program.This individual must have the necessary expertise and authority to ensure compliance with all relevant regulations.

Failure to comply with these requirements can result in severe penalties, including fines, suspension of operations, and even criminal prosecution. Over the past year, South Korea made headlines multiple times with its crypto regulations. The nation has been primarily focusing on AML regulations with intensive scrutiny. Recently, it tightened its AML laws and required exchanges to comply with them in order to provide services. Furthermore, the regulator also focused on KYC compliance.The FSC is sending a clear message that it will not tolerate lax AML controls, regardless of where the exchange is based.

Why is South Korea Taking Such a Strong Stance on Crypto AML?

South Korea's proactive approach to crypto regulation stems from a combination of factors, including concerns about financial crime, investor protection, and market stability. South Korea s strict crypto regulatory oversight is now extending to overseas exchanges that offer cryptocurrency trading services denominated in the country s currency. AML compliance mandatory for foreign crypto exchanges, says Korean regulator - InstaCoin.NewsSeveral incidents have highlighted the potential risks associated with unregulated crypto activity, prompting the government to take decisive action.

Rising Crypto-Related Crime: As the popularity of cryptocurrencies has grown, so has the incidence of crypto-related crimes, such as money laundering, fraud, and scams.The anonymous nature of crypto transactions makes them attractive to criminals seeking to conceal their illicit activities.The FSC recognizes the need to stay ahead of these evolving threats and prevent South Korea from becoming a haven for crypto criminals.
Investor Protection: South Korea has a large and active crypto investor base, and the government has a responsibility to protect these investors from fraud and market manipulation. As part of this compliance, these foreign exchanges will have to register with the Korea Financial Intelligence Unit the FSC s AML watchdog. The FSC chairman s remarks also offer another indication of South Korea s efforts to maintain strict oversight on its local crypto market.By strengthening AML controls, the FSC aims to create a more secure and transparent crypto environment, reducing the risk of investors losing their money to scams or illicit activities.
Market Stability: Unregulated crypto activity can destabilize the financial system. Major South Korean exchanges have recently extended this requirement to transactions below the threshold as a proactive compliance measure. Peter Chung pointed out that regulators currently believe local exchanges still lack adequate systems to fully manage AML responsibilities, a viewpoint implied by recent FSC communications.Money laundering and other illicit financial flows can disrupt markets, undermine trust, and create systemic risks. South Korea s strict crypto regulatory oversight is now extending to overseas exchanges that offer cryptocurrency trading services denominated in the country s currency.By implementing robust AML regulations, the FSC aims to promote market stability and prevent crypto from being used to undermine the integrity of the financial system.

Furthermore, South Korea is committed to complying with international standards on AML and combating the financing of terrorism.The Financial Action Task Force (FATF), an intergovernmental body that sets global standards on AML, has been urging countries to adopt comprehensive regulatory frameworks for crypto assets. Additionally, it could help eliminate the so-called Kimchi Premium a phenomenon where cryptocurrencies trade at higher prices on Korean exchanges due to limited foreign liquidity. However, regulatory readiness remains a key hurdle. South Korean regulators have long voiced concerns about the AML capabilities of local exchanges.South Korea's new AML mandate for foreign exchanges aligns with these international efforts and demonstrates its commitment to global financial security.

The Impact on Foreign Crypto Exchanges and the ""Kimchi Premium""

The mandatory AML compliance for foreign crypto exchanges will undoubtedly have a significant impact on the industry, both in South Korea and globally.Here's a look at some of the key implications:

Increased Compliance Costs: Implementing and maintaining a robust AML compliance program can be expensive, particularly for smaller exchanges. Eun Sung-soo, presidente de la Comisi n de Servicios Financieros (FSC por sus siglas en ingl s) de Corea del Sur, dijo que los exchanges de criptomonedas extranjeros que operan en won coreanos deben cumplir con los est ndares contra el lavado de dinero (AML por sus siglas en ingl s) del pa s.Foreign exchanges will need to invest in technology, personnel, and training to meet South Korea's stringent requirements. AML compliance mandatory for foreign crypto exchanges, says Korean regulator bizgram simlim simlimsquare sls bizgramasia singapore top store itshop itdeals deals gaming core bestThis may deter some exchanges from entering the Korean market or force them to raise fees to cover the increased costs.
Reduced Access to the Korean Market: The stringent AML requirements may create barriers to entry for some foreign exchanges. South Korea s strict crypto regulatory oversight is now extending to overseas exchanges that offer cryptocurrency trading services denominated in the country s currency. Skip to content Call NowExchanges that are unable or unwilling to comply with the regulations may be forced to withdraw from the Korean market, reducing competition and potentially limiting access to crypto assets for Korean investors.
Potential Impact on the ""Kimchi Premium"": As mentioned earlier, the ""Kimchi Premium"" is a phenomenon where cryptocurrencies trade at higher prices on Korean exchanges.This price discrepancy is partly due to limited foreign liquidity and regulatory barriers. For example, in 2025 alone, more than $8.6 billion worth of cryptocurrency was laundered through various cryptocurrency exchanges. Because cryptocurrency transactions can be anonymous, and crypto exchanges vary in the level of regulatory compliance, money laundering in this space is a significant issue.By making it easier for foreign exchanges to operate in South Korea, the new AML mandate could help reduce the ""Kimchi Premium"" by increasing competition and liquidity in the market.

However, the impact on the ""Kimchi Premium"" is not guaranteed. South Korea now requires foreign crypto exchanges to comply with AML. The rule applies to all crypto exchanges offering Korean-won trading pairs. AlsoStrict KYC rules, even within the new AML framework, can still limit foreign access and perpetuate the price discrepancy.The effectiveness of the AML regulations in reducing the ""Kimchi Premium"" will depend on how they are implemented and enforced.

Addressing Concerns About Regulatory Readiness

While the FSC's move is generally welcomed as a step towards greater crypto regulation, some experts have raised concerns about the readiness of both regulators and exchanges to fully implement and enforce the new AML requirements. South Korea s strict crypto regulatory oversight is now extending to overseas exchanges that offer cryptocurrency trading services denominated in the country s currency. Eun Sung-soo, chairman of South Korea s Financial Services Commission (FSC), said that foreign crypto exchanges that deal in the Korean won must comply with the country s Anti-Money Laundering (AML) standards.AccordingPeter Chung, a prominent voice in the Korean crypto space, has pointed out that regulators still believe local exchanges lack adequate systems to fully manage AML responsibilities.This suggests that foreign exchanges may face even greater challenges in complying with the regulations.

Challenges for Regulators

Lack of Expertise: Regulating the crypto industry requires specialized knowledge and expertise.Regulators need to understand the technology behind cryptocurrencies, the risks associated with crypto trading, and the methods used by criminals to launder money through crypto assets.Building this expertise requires investment in training and recruitment.
Resource Constraints: Enforcing AML regulations can be resource-intensive. On Decem, South Korea s financial regulator plans to crack down on individuals who use cryptocurrency for money laundering. Chairman of the Financial Services Commission (FSC) Kim Byung-hwan revealed in the 18th AML day commemoration ceremony that he observed rising illegal activities that are executed through virtual assets.Regulators need to have the resources to monitor transactions, investigate suspicious activity, and prosecute offenders.This may require increased funding and staffing.
Keeping Pace with Innovation: The crypto industry is constantly evolving, with new technologies and business models emerging all the time.Regulators need to be able to keep pace with these innovations and adapt their regulations accordingly.This requires a flexible and adaptable regulatory framework.

Challenges for Exchanges

Technology Costs: Implementing robust AML compliance programs requires investment in sophisticated technology solutions, such as transaction monitoring systems and KYC verification tools. The collapse of a major cryptocurrency exchange exposed issues like mismanagement and lack of transparency, while the failure of protocols highlighted risks with algorithmic stablecoins. Bankruptcies of crypto lending platforms underscored problematic practices and the need for customer fund protection.These technologies can be expensive, particularly for smaller exchanges.
Data Privacy Concerns: Collecting and storing personal data for KYC purposes raises data privacy concerns.Exchanges need to ensure that they are complying with all relevant data privacy regulations and protecting the data of their users.
Customer Onboarding Difficulties: Stringent KYC requirements can make it more difficult for customers to onboard onto crypto exchanges.This can lead to a decline in trading volumes and reduced profitability.

To address these challenges, regulators and exchanges need to work together to develop clear and practical AML guidelines.Regulators should also provide training and support to exchanges to help them comply with the regulations.And exchanges should invest in technology and personnel to ensure that they have the necessary capabilities to detect and prevent money laundering.

The Role of KYC and the Potential for Easing Restrictions

KYC is a cornerstone of AML compliance, and South Korean regulators have historically emphasized strict KYC rules.These rules, while effective in preventing money laundering, have also been criticized for limiting foreign access to the Korean crypto market.However, the new AML reforms could potentially pave the way for easing some of these restrictions.

By implementing robust AML controls, foreign exchanges can demonstrate their commitment to preventing illicit activity and building trust with regulators.This could lead to a relaxation of some of the more restrictive KYC requirements, making it easier for foreign investors to access the Korean market.For example, regulators might consider allowing foreign investors to use electronic KYC methods or accepting KYC documentation from trusted third-party providers.

Easing KYC restrictions could have several benefits:

Increased Foreign Investment: Lowering the barriers to entry for foreign investors could attract more capital into the Korean crypto market, boosting trading volumes and liquidity.
Reduced ""Kimchi Premium"": As mentioned earlier, increased foreign liquidity could help reduce the ""Kimchi Premium"" by bringing prices in line with global averages.
Enhanced Market Efficiency: A more open and competitive market could lead to greater efficiency and innovation.

However, any relaxation of KYC restrictions must be carefully balanced against the need to prevent money laundering and protect investors.Regulators need to ensure that any changes to the KYC regime do not create loopholes that can be exploited by criminals.A risk-based approach to KYC, where the level of scrutiny is proportionate to the risk associated with the customer or transaction, may be a suitable solution.

South Korea's Focus on Strengthening AML Enforcement

Beyond mandating AML compliance for foreign exchanges, South Korea is actively strengthening its AML enforcement capabilities across the board.The FIU is taking a proactive approach to identifying and disrupting crypto-related financial crime.

Key initiatives include:

Blocking Unregistered Crypto Exchanges: The FIU is actively identifying and blocking unregistered crypto exchanges operating in South Korea.This helps prevent illicit activity from taking place on unregulated platforms.
Establishing the ""People's Livelihood Crime AML Joint Response Team"": This joint task force brings together experts from various agencies to combat financial crimes that directly impact the lives of ordinary citizens.Crypto-related fraud and scams are a key focus of this team.
Convening Meetings to Discuss Crypto Threats: The FIU regularly convenes meetings with other government agencies and industry stakeholders to discuss emerging crypto threats and develop strategies to mitigate them.

These efforts demonstrate South Korea's commitment to creating a comprehensive AML framework for the crypto industry.By combining regulatory requirements with strong enforcement capabilities, the country aims to deter criminal activity and protect its financial system.

Examples of Crypto-Related Money Laundering and the Need for Stronger AML

The urgency of strengthening AML regulations in the crypto space is underscored by the increasing prevalence of crypto-related money laundering.In 2023 alone, more than $8.6 billion worth of cryptocurrency was laundered through various cryptocurrency exchanges.This staggering figure highlights the scale of the problem and the need for effective countermeasures.

Here are some real-world examples of how cryptocurrencies are used for money laundering:

Mixing Services (Tumblers): These services obscure the origin of cryptocurrency by mixing it with other funds, making it difficult to trace the original source.
Privacy Coins: Cryptocurrencies like Monero and Zcash offer enhanced privacy features, making it harder to track transactions.While these coins have legitimate uses, they can also be exploited by criminals seeking to conceal their activities.
Decentralized Exchanges (DEXs): DEXs allow users to trade cryptocurrencies without going through a centralized intermediary.While this offers greater freedom and privacy, it also makes it more difficult to enforce AML regulations.
Cross-Border Transactions: Cryptocurrencies can be easily transferred across borders, making it easier for criminals to move funds to jurisdictions with lax AML controls.

The collapse of major cryptocurrency exchanges has further exposed issues like mismanagement and lack of transparency, further strengthening the argument for AML regulation.The failure of certain protocols highlighted risks with algorithmic stablecoins, and the bankruptcies of crypto lending platforms underscored problematic practices and the need for customer fund protection.

What Does This Mean for the Future of Crypto in South Korea?

The future of crypto in South Korea hinges on the successful implementation and enforcement of the new AML regulations.While the regulations may create challenges for some exchanges, they also offer the potential for a more secure and sustainable crypto ecosystem.By creating a level playing field and reducing the risk of financial crime, South Korea can attract more legitimate businesses and investors into the crypto space.

Here are some potential future developments:

Increased Institutional Investment: As the regulatory landscape becomes clearer and more stable, institutional investors may become more comfortable investing in crypto assets.This could lead to a significant influx of capital into the Korean crypto market.
Innovation in AML Technology: The increased focus on AML compliance could drive innovation in AML technology.Companies may develop new and more effective tools for detecting and preventing crypto-related financial crime.
Greater Collaboration Between Regulators and Industry: A collaborative approach between regulators and industry stakeholders will be essential for developing effective and practical AML solutions.This collaboration could lead to a more tailored and nuanced regulatory framework.
South Korea as a Global Crypto Hub: By creating a well-regulated and secure crypto environment, South Korea could position itself as a global leader in the crypto space.

Conclusion: Key Takeaways and the Path Forward

The South Korean regulator's decision to mandate AML compliance for foreign crypto exchanges dealing in the Korean won represents a significant step towards mainstreaming cryptocurrency within a regulated financial system.While this new mandate may initially pose challenges in terms of compliance costs and market access, it ultimately aims to foster a safer, more transparent, and sustainable crypto ecosystem.By mitigating the risks of financial crime, protecting investors, and promoting market stability, South Korea seeks to unlock the full potential of cryptocurrency while safeguarding its financial integrity.

Key takeaways:

AML compliance is now mandatory for foreign crypto exchanges dealing in Korean won.
This regulation requires registration with KoFIU, robust KYC procedures, transaction monitoring, and compliance with the Travel Rule.
South Korea is strengthening AML enforcement to combat crypto-related crime and protect investors.
The new regulations could impact the ""Kimchi Premium"" and potentially lead to eased KYC restrictions.
The future of crypto in South Korea depends on successful implementation and enforcement of AML regulations.

The path forward requires ongoing collaboration between regulators, exchanges, and industry stakeholders.By working together, they can develop innovative AML solutions, address regulatory challenges, and create a thriving crypto ecosystem that benefits both investors and the economy as a whole.The goal is to strike a balance between fostering innovation and safeguarding against financial crime, ensuring that cryptocurrency can contribute positively to the financial landscape in South Korea and beyond.