South Korea AML crackdown: exchanges fight 10m won “suspicious” rule

South Korea’s AML crackdown is facing pushback from major exchanges and their trade group. The Digital Asset eXchange Alliance (DAXA), representing 27 registered virtual asset service providers including Upbit, Bithumb, Coinone, Korbit and Gopax, submitted comments against proposed AML framework changes. The key issue is a requirement that exchanges report every overseas crypto transfer worth 10 million won (about $6,800) as “suspicious,” even when no risk is identified. DAXA warns this could expand suspicious reporting from roughly 63,000 cases last year to more than 5.4 million annually for Korea’s five largest platforms—an ~85x jump—making AML compliance harder and more costly in practice. DAXA also objects to an added proposal to verify customer data accuracy, saying it goes beyond what the underlying law requires. Regulators—the Financial Services Commission (FSC) and the Financial Intelligence Unit (FIU)—opened a public notice period on March 30, running until May 11, with final rules expected in July after legal and regulatory review. Meanwhile, courts have granted interim relief in existing AML sanction cases: Upbit’s parent Dunamu won a first-instance ruling cancelling a three-month partial business suspension, Bithumb received a pause on a six-month partial suspension, and Coinone obtained a temporary halt despite a 3-month suspension and a 52 billion won fine. For traders, this South Korea AML crackdown increases near-term uncertainty around compliance timelines and potential enforcement actions, which could affect venue liquidity. However, the ultimate impact will depend on how the final AML rules land and on ongoing court outcomes.