South Korea's Financial Intelligence Unit (FIU) has flagged a record number of suspicious cryptocurrency transactions in 2025, with 36,684 suspicious transaction reports (STRs) filed by registered crypto service providers between January and August. This figure already exceeds the combined total of 35,734 reports from 2023 and 2024, underscoring a rapid rise in illicit activity.
The bulk of these reports are linked to hwanchigi, an illegal practice where funds are moved abroad using stablecoins like USDT before being funneled back into Korea and cashed out in won. Customs officials recently uncovered a scheme involving over 57 billion won (roughly $42 million) in USDT remittances. From 2021 to August 2025, prosecutors received referrals for crypto-related crimes valued at over 9.5 trillion won, with more than 90% tied to unregistered foreign exchange networks.
Lawmakers, including Jin Sung-joon, are urging tighter regulation, calling for enhanced oversight of virtual asset providers, comprehensive stablecoin tracking, and better coordination between regulators. "The surge in suspicious activity shows that current controls are not enough," Jin stated, pressing for faster responses to evolving laundering methods.
Amid these concerns, South Korea advanced its stablecoin ecosystem with the launch of KRW1, the country's first won-backed digital currency, on September 18, 2025. Developed by BDACS on the Avalanche blockchain and reviewed by Woori Bank, KRW1 aims to maintain a one-to-one peg with the Korean won. This move aligns with global digital finance trends, even as the Bank of Korea paused its central bank digital currency (CBDC) project after pilot testing.