South Korea Proposes Expanded FIU Powers to Combat Unregistered Crypto Operators

South Korea Strengthens Regulatory Authority Over Unregistered Crypto Operators

South Korean lawmakers have introduced legislation aimed at significantly expanding the Financial Intelligence Unit’s (FIU) enforcement authority against unregistered cryptocurrency businesses. The bill, filed on Thursday by People Power Party lawmaker Eom Tae-young and nine colleagues, seeks to amend the Act on Reporting and Using Specified Financial Transaction Information. The proposal aims to streamline the enforcement process for regulatory violations in the digital asset sector.

Expanded Investigative Powers

The proposed legislation would fundamentally reshape how the FIU addresses suspected violations of crypto registration requirements. Under the bill, members of the public would be able to report suspected violations directly to the FIU. Once such a report is received, the FIU would gain authority to investigate and analyze the allegations, file formal complaints with relevant authorities, request criminal investigations into suspected operators, and share investigative findings with law enforcement agencies.

These powers represent a significant departure from the current system, where the FIU identifies suspected unregistered operators but must rely on police and other authorities to conduct independent investigations. The bill would enable the FIU to take a more active role in pursuing enforcement action, rather than serving solely as a referral agency. This change aims to eliminate bottlenecks that have slowed enforcement efforts to date.

Addressing Current Enforcement Limitations

The legislative proposal directly addresses enforcement challenges that have hampered South Korea’s regulatory efforts. According to Yonhap, between August 2022 and August 2025, police suspended investigations or preliminary inquiries into 23 of 25 unregistered virtual asset service providers that the FIU had referred for action. The companies and related individuals were reportedly based overseas, creating additional complications for enforcement authorities.

To understand the scope of the issue, the FIU disclosed in June that 28 cryptocurrency service providers were registered with the agency, while 40 suspected illegal operators had been referred to investigative authorities. These figures underscore the ongoing need for stronger enforcement mechanisms. For any cryptocurrency company seeking to serve South Korean customers, registration with the FIU is a mandatory requirement. Before the bill can take effect, it must pass the National Assembly. The measure remains in the introduction stage and will require legislative approval to amend the existing law.

Enhanced regulatory oversight of unregistered crypto operators supports the development of a more transparent and compliant market environment, which benefits legitimate participants in the digital asset ecosystem.

Source: Yonhap, FIU, via Cointelegraph. Not financial advice.