South Korea’s Digital Asset Exchange Alliance (DAXA), representing 27 registered virtual asset service providers, has lodged formal objections with the Financial Services Commission and the Financial Intelligence Unit over proposed amendments to the enforcement decree of the Specific Financial Information Act.
Summary
- South Korea’s DAXA industry alliance has formally objected to a plan forcing exchanges to treat all overseas crypto transfers above 10 million won (about $6,800) as suspicious transactions.
- The group warns the rule would blow up annual suspicious transaction reports from roughly 63,000 to more than 5.4 million at the five largest platforms, making compliance “virtually unworkable.”
- The clash comes as Upbit, Bithumb and Coinone win court relief from earlier sanctions, highlighting growing friction between regulators and the domestic digital asset industry.
Under the draft rules, domestic exchanges would have to file a suspicious transaction report for any transfer to a foreign VASP once it hits 10 million won, regardless of risk indicators or counterparties, effectively turning a value threshold into an automatic suspicion trigger.
DAXA argues this approach ignores the “low‑risk transactions allowed, high‑risk transactions restricted” principle laid out in the FIU’s own legislative notice and instead forces exchanges to flag vast numbers of routine cross‑border transfers as suspicious.
The alliance estimates that at the country’s five major platforms — Upbit, Bithumb, Coinone, Korbit and Gopax — annual STR filings would jump 85‑fold from about 63,000 cases last year to over 5.4 million, a surge it says would overwhelm compliance teams and dilute meaningful AML signals.
DAXA also opposes a proposed requirement that exchanges verify the accuracy of customer information beyond existing Know Your Customer duties, contending that the subordinate decree is trying to impose obligations “not clearly grounded in primary legislation.”
Court wins fuel broader regulatory confrontation
The industry pushback is unfolding as Korean exchanges fight separate sanctions in court.
On April 9, a Seoul court sided with Dunamu, operator of Upbit, overturning a three‑month partial business suspension that the FIU imposed after alleging 44,948 transactions with 19 unregistered overseas platforms; the FIU has appealed.
Bithumb won a similar ruling on April 30, when the court halted a six‑month partial business suspension tied to alleged violations of specific financial information rules, while Coinone has secured a temporary stay against a three‑month suspension and a 5.2 billion won fine over KYC shortcomings.
The FIU’s current consultation on the 10 million won reporting rule runs until May 11, after which the decree is expected to be finalized in July following regulatory and legal review, leaving little time for a compromise between tighter oversight and what exchanges describe as “excessive and operationally impossible” compliance burdens.
In a recent crypto.news overview, the 10 million won trigger was flagged as part of a broader push that could see major global platforms classified as high risk for Korean users.
Another crypto.news analysis underscored how a “crypto law vacuum” has left the FIU leaning on expansive interpretations of existing statutes, driving a wave of fines and suspensions now being tested in court.
A separate crypto.news report highlighted that these courtroom victories for exchanges are already reshaping the balance of power, as judges insist regulators account for firms’ own compliance efforts rather than relying solely on strict liability.
