South Korea's Digital Asset Exchange Alliance (DAXA), representing 27 registered virtual asset service providers, has lodged formal objections with the Financial Services Commission (FSC) and the Financial Intelligence Unit (FIU) over proposed amendments to the enforcement decree of the Specific Financial Information Act.
Under the draft rules, domestic exchanges would have to file a suspicious transaction report (STR) for any transfer to a foreign virtual asset service provider (VASP) once it hits 10 million won (about $6,800), regardless of risk indicators or counterparties, effectively turning a value threshold into an automatic suspicion trigger.
DAXA argues this approach ignores the “low‑risk transactions allowed, high‑risk transactions restricted” principle laid out in the FIU’s own legislative notice and instead forces exchanges to flag vast numbers of routine cross‑border transfers as suspicious. The alliance estimates that at the country’s five major platforms — Upbit, Bithumb, Coinone, Korbit and Gopax — annual STR filings would jump 85‑fold from about 63,000 cases last year to over 5.4 million, a surge it says would overwhelm compliance teams and dilute meaningful AML signals.
DAXA also opposes a proposed requirement that exchanges verify the accuracy of customer information beyond existing Know Your Customer (KYC) duties, contending that the subordinate decree is trying to impose obligations “not clearly grounded in primary legislation.”
Court wins fuel broader regulatory confrontation: The industry pushback is unfolding as Korean exchanges fight separate sanctions in court. On April 9, a Seoul court sided with Dunamu, operator of Upbit, overturning a three‑month partial business suspension that the FIU imposed after alleging 44,948 transactions with 19 unregistered overseas platforms; the FIU has appealed. Bithumb won a similar ruling on April 30, when the court halted a six‑month partial business suspension tied to alleged violations of specific financial information rules, while Coinone has secured a temporary stay against a three‑month suspension and a 5.2 billion won fine over KYC shortcomings.
The FIU’s current consultation on the 10 million won reporting rule runs until May 11, after which the decree is expected to be finalized in July following regulatory and legal review, leaving little time for a compromise between tighter oversight and what exchanges describe as “excessive and operationally impossible” compliance burdens.
