South Korea's 'First-In, First-Out' Crypto Enforcement Accelerates AML Crackdown

South Korea's Financial Intelligence Unit (FIU) is escalating its regulatory crackdown on cryptocurrency exchanges, imposing sanctions for anti-money laundering (AML) compliance failures after a year-long inspection campaign. The enforcement actions, which began with a landmark penalty against Upbit operator Dunamu, are now targeting Korbit, GOPAX, Bithumb, and Coinone, with penalties expected to follow the order of inspections completed since August 2024. The FIU's approach underscores South Korea's commitment to aligning its crypto sector with global AML standards, even as delays in implementing a crypto tax regime create regulatory uncertainty.

Dunamu became the first to face consequences in November 2025, when it was fined 35.2 billion won ($24.35 million) and subjected to a three-month suspension of new customer deposits and withdrawals. The penalties followed a February disciplinary warning for its CEO and were based on over 700,000 AML violations, including lapses in KYC protocols and failure to report suspicious transactions. Regulators have since signaled that similar fines and operational restrictions are likely for the remaining exchanges, with Korbit and GOPAX next in line for sanctions due to their October and December 2024 inspections. Bithumb, inspected in March 2025, and Coinone, inspected in April, may face delays as authorities scrutinize Bithumb's order-book operations.

The FIU's "first-in, first-out" enforcement model ensures that exchanges inspected earlier will receive penalties sooner, with the full process expected to conclude by mid-2026. Industry experts anticipate fines in the tens of billions of won for each platform, potentially totaling hundreds of billions across the sector. These measures reflect South Korea's broader strategy to standardize AML compliance and deter regulatory arbitrage, particularly as the country prepares to introduce stricter investor protections under its upcoming virtual asset framework.

The crackdown has drawn mixed reactions. While some analysts argue the penalties could reshape the competitive landscape by penalizing non-compliant platforms, others suggest stricter oversight may ultimately boost institutional confidence in South Korea's crypto market. However, the enforcement push coincides with ongoing delays in implementing a crypto tax regime, now postponed to January 2027 due to infrastructure challenges. This regulatory limbo has raised concerns about capital flight and the potential for traders to migrate to less regulated markets.

South Korea's approach mirrors global trends in crypto regulation, including the U.S. SEC's enforcement actions and the EU's MiCA framework, but with a distinct emphasis on swift, severe penalties. The FIU's actions also highlight tensions between fostering innovation and ensuring compliance, as the government balances its crackdown with efforts to support blockchain development through a new policy task force. For now, the sector remains under intense scrutiny, with exchanges investing in compliance upgrades to meet regulatory expectations.