[Exclusive] Overseas Crypto Exchanges to Be Blocked Immediately If Not Reported to FIU

BCRC and FIU Agree on Separate Application of Criminal and Financial Transaction Laws
"Investigations Challenging as Most Operators Are Overseas"
Blocking Possible if Illegality or Preventive Need Is Recognized

The Broadcasting and Communications Review Committee (BCRC) and the Financial Intelligence Unit (FIU) have agreed to request corrective actions against overseas illegal virtual asset exchanges even if fraud damage has not been confirmed. They announced that they would proceed with blocking procedures as long as the illegality and the necessity of preventive measures are recognized. Both agencies plan to finalize specific standards as early as this month.

According to data submitted by the office of Democratic Party lawmaker Lee Juhee to the BCRC on the 23rd, the committee agreed that criminal law would be applied to sites run by unregistered virtual asset businesses that, through investigation, correspond to illegal information involving virtual asset investment fraud, and that the Act on Reporting and Use of Specific Financial Transaction Information (the “Special Act for Financial Information”) would be applied to illegal information where services are provided to domestic users or actual trading occurs without proper reporting to the FIU. The BCRC stated that, for information with clearly proven illegality, it would quickly resume review and request corrective actions to prevent damage to the national economy.

This policy expands on a proposal that emerged during a work consultation between the BCRC and FIU in July. At the time, the BCRC suggested prioritizing the blocking of sites where damages from criminal funds laundering, illegal remittance, tax evasion, or personal information breaches were confirmed. This approach mirrored review procedures applied to fraudulent sites, relying on the crime identification documents or internal investigation reports prepared by the police based on recognized damage. The FIU responded that it would consider the BCRC's proposal.

An FIU official stated, "We will discuss expanding the review scope not only to investment fraud but to illegal information overall," and added, "Compared to the previous proposal by the BCRC, the scope of blocking will become broader, and more concrete developments are expected in future consultations."

A BCRC official explained, "Upon confirming with investigative agencies, we found that most site operators are based overseas, making the investigations themselves difficult." The official added, "The FIU has tracked records of having requested these sites to report domestically or monitored changes to the services, but rather than relying on past records, the direction has shifted toward implementing preventive actions based on current standards." The official went on to say, "We plan to meet with the FIU to discuss the standards as early as next week or the week after, and this is not an issue to be put off or delayed any further."

It appears that the pace of blocking illegal exchanges will accelerate as the BCRC carried out an organizational restructuring on August 31. Notably, to formalize electronic reviews of illegal information, the committee established a "Digital Economic Crime Task Force" in this restructuring. General agenda items that require deliberation, such as defamation or harmful information, will continue to be handled through face-to-face review by the Communications Review Bureau. International cooperation functions with overseas organizations and businesses have been consolidated under the International Cooperation Center. Meanwhile, a "Digital Innovation Team" has been created under the Planning and Coordination Office to centralize IT personnel, advance the review support system, and promote AI and work automation. The Rights Protection Bureau was reorganized into the "User Protection Bureau" (composed of the User Protection Planning Team and Dispute Mediation Team) to strengthen dispute mediation functions.

The BCRC has been criticized for having effectively neglected requests to block overseas illegal virtual asset exchanges, citing repeated review suspensions due to vacancies on the committee, ongoing investigations, or disagreements over standards. Until July, differences remained between the FIU and BCRC. The FIU insisted that, under the “Act on Reporting and Use of Specific Financial Transaction Information,” the problem of overseas virtual asset business sites could not simply be viewed as unregistered business operations. The BCRC countered that, according to its internal regulations, reviews must be suspended for cases under investigation, and it had yet to receive official written updates from the FIU regarding additional investigation matters, so it had to maintain the previous suspension decisions. Concerns were also raised that blocking entire sites solely for being unregistered could raise controversy over excessive regulation.

Since 2022, there have been 100 instances where the FIU requested reviews. Of these, decisions to suspend reviews were made for only 62 cases, following two meetings on December 5, 2022, and December 4, 2023. Upon re-examination of these 62 cases, only 36 remained accessible. The rest were either closed sites, disconnected from the Internet Protocol (IP), or, in a few cases, the address supplied by the FIU was found to be incorrect. Among the remaining 36, some had content that had changed since the initial review request. The other 38 cases have not yet been reviewed. The BCRC plans to begin taking action against these sites once the standards are in place.

Currently, the National Assembly is accelerating the discussion on the phase-two regulatory bill, the "Digital Asset Basic Act," which will govern the overall market. The National Policy Committee is pursuing a public hearing for legislative enactment on the 30th, and bills that regulate by dividing approvals, registrations, and reports by business type have already been proposed. The legislative bill for the Digital Asset Basic Act, sponsored by Democratic Party lawmaker Min Byungdeok in June last year, classifies digital asset businesses into 10 categories: trading, brokerage, custody, collective management, wallet management, discretionary investment, advisory, order transmission, pseudo-advisory, and other related businesses. Under the bill, trading, brokerage, and custody are subject to approval by the Financial Services Commission; collective management, wallet management, discretionary investment, and advisory must be registered; and order transmission and pseudo-advisory require notification. Operating without approval would result in imprisonment for up to five years or a fine of up to 20 million won; without registration, up to three years or a fine of up to 100 million won; and without notification, up to one year or a fine of up to 30 million won.

Jeong Myeongho, chief specialist of the Policy Committee, stated in a review report, "Digital asset businesses have different technological characteristics depending on the type, and the risk factors affecting the market or users also differ. Therefore, classifying digital asset businesses as in the proposed law allows more appropriate regulatory or development policies to be designed. Given that operators can provide a wide variety of services by type, such legislative measures are deemed necessary."

This content was produced with the assistance of AI translation services.