South Korea Flags Record Number of Suspicious Crypto Transactions in 2025
South Korean authorities have raised concerns over a significant increase in suspicious cryptocurrency transactions this year, surpassing the total figures from the past two years combined.
According to data from the Financial Intelligence Unit (FIU) and the Korea Customs Service (KCS), local virtual asset service providers (VASPs) reported 36,684 suspicious transaction reports (STRs) between January and August 2025.
STRs play a crucial role in South Korea’s Anti-Money Laundering (AML) efforts, with financial institutions, casinos, and VASPs required by law to file reports when there are suspicions of criminal activities such as money laundering or terrorist financing.
The number of STRs filed in the first eight months of 2025 has already exceeded the combined totals of 2023 and 2024, indicating a concerning trend in illicit transactions. This surge in suspicious activities dwarfs the figures from 2021 and 2022 as well.
Focus on Illegal Foreign Remittances and Stablecoins
Authorities in South Korea have highlighted that a significant portion of the flagged transactions involve illegal foreign exchange remittances, known as “hwanchigi.” Criminal proceeds are often converted into cryptocurrencies through offshore platforms and funneled into domestic exchanges for cashing out in the local currency.
From 2021 to August 2025, the KCS has referred $7.1 billion worth of crypto-related crimes to prosecutors, with the majority of cases, amounting to $6.4 billion, linked to hwanchigi schemes.
In a notable case in May, customs officials uncovered an underground operation using the Tether (USDT) stablecoin to facilitate illegal transactions totaling $42 million between South Korea and Russia. This incident underscores the challenges posed by the misuse of stablecoins for illicit financial activities.
Representative Jin has called for enhanced enforcement measures by agencies like the KCS and FIU to effectively track criminal funds and prevent disguised remittances. It is essential for the government to establish systematic strategies to combat evolving forms of foreign exchange crimes.
Global Policy Implications
The surge in suspicious crypto transactions in South Korea reflects a broader policy dilemma faced by regulators worldwide. While digital currencies and stablecoins offer efficiency in payments, they also present new avenues for illicit financial flows.
Regulations such as the European Union’s Markets in Crypto-Assets (MiCA) aim to address risks associated with cross-border transactions by requiring issuers to obtain licenses for transparency and imposing limits on stablecoin volumes.
In response to the challenges posed by digital currencies, central banks in Europe and the UK have considered imposing caps on individual holdings to curb potential misuse. However, the effectiveness of such measures remains a subject of debate among industry stakeholders.
As countries grapple with the regulatory implications of the crypto industry, collaboration and innovative solutions will be crucial in addressing the growing concerns surrounding illicit activities in the digital asset space.