South Korea's Crypto Boom Drives Illicit Cash Surge, AML Race Intensifies

South Korea’s Financial Intelligence Unit (FIU) has reported a record surge in suspicious cryptocurrency transactions in 2025, signaling escalating risks of money laundering and illicit foreign exchange activities. From January to August 2025, virtual asset service providers filed 36,684 suspicious transaction reports (STRs), surpassing the combined total of 35,734 cases from 2023 and 2024. This marks a dramatic increase from 199 cases in 2021, highlighting a rapid acceleration in crypto-related financial crimes. The Korea Customs Service (KCS) attributed 90.2% of the 9.561 trillion won ($7.1 billion) in crimes referred to prosecutors between 2021 and August 2025 to illegal foreign exchange transactions, where illicit funds are converted into virtual assets abroad and cashed out domestically.

The rise in STRs aligns with the growing adoption of cryptocurrencies in South Korea, where virtual asset investors now exceed 10 million. Stablecoins, such as Tether (USDT), have emerged as a key tool for illicit activity. In May 2025, customs officials uncovered a case involving a currency exchanger who illegally remitted 57.1 billion won ($42 million) in USDT to Russian importers through 6,000 transactions between 2023 and 2024. Lawmakers, including Rep. Jin Sung-joon, warned that stablecoins’ increasing use in real-world payments amplifies their potential for misuse in foreign exchange crimes.

The legal framework mandates that virtual asset service providers report transactions suspected of money laundering to the FIU. This includes practices where criminal proceeds are converted into crypto via overseas exchanges and transferred to domestic platforms for cash conversion, bypassing authorized foreign exchange banks. The surge in STRs reflects both the scale of crypto adoption and the sophistication of illicit schemes. For instance, the 2025 figures already double the 19,658 STRs recorded in 2024, underscoring the exponential growth in suspicious activity.

Authorities have emphasized the need for enhanced enforcement. Rep. Jin called for systematic measures to track criminal funds, block disguised remittances, and address new types of foreign exchange crimes. The KCS and FIU are under pressure to implement stricter monitoring technologies and interagency collaboration to counter evolving threats. Global regulators, including the EU’s Markets in Crypto-Assets (MiCA) framework, have also introduced measures to limit large stablecoin volumes and mandate transparency for cross-border transactions, reflecting a broader international effort to mitigate crypto-related risks.

The surge in STRs underscores the dual-edged nature of cryptocurrency adoption. While digital assets offer financial inclusion and innovation, their pseudonymous and borderless characteristics create vulnerabilities for abuse. South Korea’s experience mirrors global trends, where regulators are racing to balance innovation with oversight. The country’s upcoming rollout of regulated spot crypto ETFs and won-based stablecoins by late 2025 aims to formalize the sector, but the current data highlights the urgency of prioritizing anti-money laundering (AML) safeguards.

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Source: [1] Cryptocurrency Money Laundering Cases Hit Record High (https://www.businesskorea.co.kr/news/articleView.html?idxno=252673)

[2] South Korea Reports Record 36,000 Suspicious Crypto … (https://tokenpost.com/news/regulation/16769)

[3] South Korea Reports 36.6K Suspicious Crypto Deals in 2025 … (https://crypto2community.com/crypto-news/south-korea-reports-36-6k-suspicious-crypto-deals-in-2025-surpassing-35-7k-in-2023-and-2024-combined/)

[4] South Korea Flags Record Suspicious Crypto Transactions in 2025 (https://cointelegraph.com/news/south-korea-record-suspicious-crypto-transactions-2025)

[5] South Korea’s Crypto Push: Bitcoin ETFs Headed for Approval in … (https://bitcoinist.com/south-koreas-crypto-push-bitcoin-etfs-headed-for-approval-in-2025/)