South Korea has experienced a significant uptick in cryptocurrency trading activity, particularly following a notable market rebound.

This surge in trading activity has corresponded with a substantial increase in alerts received by authorities, signaling potential suspicious transactions from crypto service providers in 2023, marking a nearly 49% rise compared to the previous year.

Growing Concerns

A report released by the Financial Intelligence Unit (FIU) revealed that South Korea recorded 16,076 reported crypto transactions suspected of being linked to illicit activities such as money laundering, market manipulation, or drug trading throughout 2023.

The FIU attributed this surge in reported transactions to enhanced communication with domestic companies, urging them to remain vigilant and report any suspicious activities promptly.

While the volume of reports related to suspected crypto-related crimes surged by approximately 90% in 2023 compared to the previous year, the FIU refrained from disclosing specific details about these alerts, citing legal restrictions under the Specified Financial Information Act.

According to Crypto Potato, clarity was lacking regarding whether these alerts originated exclusively from crypto exchanges or other entities within the crypto ecosystem.

Increased Regulatory Oversight and Response

The release of the FIU report coincides with heightened regulatory scrutiny within South Korea, prompted by a series of notable failures and incidents in 2023.

The new legislation mandates senior public officials to disclose their digital asset holdings, as the Ministry of Personnel Management announced, to bolster transparency and accountability within the public sector.

Moreover, the Korea Customs Office unveiled that a significant portion, approximately 88%, of illicit foreign exchange dealings involved digital assets, with some perpetrators exploiting cryptocurrencies to evade taxes.

According to FSC, the customs authority has established a specialized team dedicated to combating cryptocurrency-related crimes, reflecting the government's commitment to curbing illicit activities within the crypto space.

Looking ahead, the FIU aims to introduce a new system designed to swiftly halt suspicious virtual asset transactions before formal investigation by local prosecutors. Set to undergo preliminary testing by March of the current year; this system represents a proactive approach to mitigating potential risks associated with illicit cryptocurrency transactions.

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