Suspicious Transfers Spark Regulatory Alarm
South Korea is confronting a wave of crypto-related financial crime after authorities discovered that transfers to Cambodia increased by more than 1,400x in the last year, exposing significant anti-money laundering (AML) gaps across the country’s digital asset ecosystem. The largest domestic exchanges, Bithumb and Upbit, facilitated the majority of flagged transactions, sending funds to Huione Guarantee, an online marketplace in Cambodia that has already been sanctioned by the U.S. and UK. Most of these transfers were conducted in USDT stablecoins, making them highly fluid and difficult to control across borders.
He emphasized that crypto flows often move before reporting and blocking measures can be activated, reflecting an ongoing cat-and-mouse dynamic between regulators and organized fraud networks.
Cross-Border Criminal Networks Exploit Regulatory Blind Spots
Financial scams involving crypto transfers to Cambodia have now become a national political issue. At a parliamentary audit on October 27, lawmakers questioned whether South Korea’s regulatory oversight had failed to keep pace with increasingly sophisticated cross-border financial crime. Jung noted that as domestic enforcement strengthened, fraud operations shifted to offshore hubs in Cambodia and the Philippines, where groups collaborate with local criminal networks.
This shift comes at a time when South Korea has emerged as the world’s second-largest digital asset market, behind only the United States. According to the Bank of Korea, the country’s five major exchanges collectively held $73 billion in assets at the end of 2024, with crypto trading volumes surpassing stock market volumes—a milestone that underscores the scale and stakes of enforcement.
The Regulatory Framework Has Not Fully Caught Up
The government introduced a landmark digital asset law in 2024, building on earlier reforms in 2021. The updated rules strengthened AML oversight, introduced the Travel Rule, and required exchanges to share verified identity data for transfers exceeding one million won.
This legal ambiguity makes it unclear whether moving tokens abroad requires advance reporting to the Bank of Korea, which leaves both regulators and users operating in legal uncertainty.
The Market Becomes a Gatekept Oligopoly
The tightening of AML rules effectively reshaped the exchange landscape. Before the AML Act, more than 60 crypto exchanges operated nationwide. After enforcement, only five secured the real-name verified bank accounts required to offer Korean won trading. Attorney Tae Eon Koo described this system as both a safeguard and a roadblock, since banks now function as gatekeepers to the crypto market. Without a banking partner, new exchanges cannot realistically enter the sector.
Binance Re-Enters and the Competitive Balance Shifts
In October, Binance regained access to South Korea by acquiring 67% of GOPAX, an exchange with an existing banking partnership.
However, domestic exchanges argue that foreign players can bypass requirements by acquiring licensed platforms, creating what they describe as “reverse discrimination”.
The future of South Korea’s crypto ecosystem may depend on how quickly regulators can close AML gaps without stifling competition or innovation. The balance between compliance, market fairness, and global integration is now the central challenge.
