With the rapid ascent of crypto investments in South Korea, now exceeding 10 million participants, the pressing need for regulatory countermeasures is becoming increasingly evident. Recently, a prominent lawmaker from the ruling party has raised concerns about the surge in suspicious transaction reports (STRs) related to digital currencies.

Record Numbers of Suspicious Activity Reports

On a recent occasion, lawmaker Jin Sung-joon, associated with the Democratic Party of Korea (DPK) and serving on the National Assembly’s Planning and Finance Committee, emphasized the potential risks linked to the expanding utilization of digital assets.

He noted, “As the use of stablecoins becomes more prevalent for payments in the real economy, the opportunity for their misuse in illicit financial activities is escalating.”

Data presented by the Financial Intelligence Unit (FIU) shows a staggering increase in STRs from local virtual asset service providers (VASPs), nearly doubling within the current year. The figures reached 36,684 cases from January through August, surpassing the total from the past two years combined.

In terms of percentage, STR cases from the first eight months of 2025 indicate an 86% surge compared to the preceding year. Notably, the number of reported cases has seen a dramatic rise over the past five years, from just 199 in 2021 to 10,797 in 2022. In comparison, the FIU registered 16,076 and 19,658 cases in 2023 and 2024, respectively.

In South Korea, VASPs are mandated by the Specific Financial Information Act to report any suspected instances of money laundering or other illegal activities to the FIU. To operate legally in the country, exchanges must register as VASPs and obtain a license, which allows them to manage, store, and deal with crypto assets.

Earlier this year, authorities uncovered that several well-known international exchanges, including platforms like BitMEX and KuCoin, lacked proper VASP registration, leading to a ban on 17 crypto applications in March.

According to the Korea Customs Service (KCS), as highlighted by lawmaker Jin, the value attributed to crypto-related crimes referred for prosecution reached a staggering 9.5 trillion won (approximately $7.1 billion) from January 2021 to August 2025, with an alarming 90% tied to illegal cross-border transactions executed via unlicensed channels.

Navigating Crypto Regulations in South Korea

Authorities have confirmed instances of stablecoins being utilized in unlawful activities. Jin reiterated the necessity for all relevant agencies to collaborate on effective strategies to counteract these emerging financial crimes and implement preventive measures against illicit behaviors.

There must be systematic efforts among agencies such as the Customs Service and the FIU, focusing on effective fund tracking and halting covert financial transfers while introducing comprehensive counter-strategies against these new forms of foreign exchange crimes.

Additionally, the Financial Services Commission (FSC) has been proactively working on developing relevant legislation concerning digital assets. A crucial milestone is anticipated in the near future, with plans to unveil a framework outlining regulations for the issuance and distribution of won-backed stablecoins.

With the stablecoin sector gaining substantial momentum on a global scale, South Korean lawmakers are diligently pushing to finalize the necessary legislative framework. Several proposals have been introduced in the National Assembly this year, including competing bills from both the ruling and opposition parties in July.

The financial sector is reportedly engaged in discussions with major players such as Tether and Circle to explore potential partnerships. As anticipation builds for the new regulatory framework, the crypto custody firm BDACS has rolled out the first ever South Korean won-backed stablecoin, KRW1, on the Avalanche blockchain.

In partnership with Woori Bank, one of the largest financial institutions in South Korea, this initiative aims to use the stablecoin as a low-cost payment and settlement solution for governmental programs, effectively laying the groundwork for a robust digital asset market.