[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 Broadcast Media and Communication Review Committee (BMCC) and the Financial Intelligence Unit (FIU) have reached an agreement to issue corrective requests for overseas illegal virtual asset exchanges, even if fraud victims have not yet been confirmed. As long as violations of the law and the need for preventative action are acknowledged, the process of blocking access will be launched. The two organizations plan to finalize specific standards as early as this month.

According to data submitted by the office of Assemblywoman Lee Juhee from the Democratic Party of Korea, received from BMCC on the 23rd, the committee intends to apply criminal law to websites operated by unregistered virtual asset service providers that are determined to constitute illegal information related to virtual asset investment fraud through investigations. Furthermore, both agencies reached a consensus that cases involving illegal information—where services are provided to domestic users without FIU notification or illicit transactions are conducted—should fall under the Act on Reporting and Using Specified Financial Transaction Information. The BMCC stated that information clearly proven to be illegal will rapidly undergo review and will be subject to corrective orders to prevent damage to the national economy.

This policy is an expansion of a proposal that emerged during the BMCC and FIU’s work consultations in July. At that time, BMCC suggested prioritizing the blocking of sites confirmed to be involved in money laundering, illegal currency transfers, tax evasion, or personal information leaks. This process is equivalent to the method used for reviewing scam sites and is based on investigative agency reports or internal investigation documents prepared upon discovery of such crimes by the police. The FIU responded that it would review the BMCC’s proposal.

An FIU representative stated, "We won't limit the review scope to investment fraud, but will discuss all types of illegal information. The blocking scope will be broader than what BMCC previously proposed, and more detailed specifics will be developed in future discussions."

A BMCC representative explained, "Through the law enforcement agencies, we've found that most site operators are located overseas, making investigations themselves challenging. The FIU has records of requesting domestic registration for these sites and tracking whether the service content has changed. Instead of relying on outdated data, we are shifting to taking preventive action based on current conditions." The official continued, "We plan to meet with the FIU as early as next week or the week after to discuss the standards. This is not an issue to be postponed or delayed by placing it at a lower priority."

The BMCC implemented an organizational reshuffle on the 31st of last month, which is expected to accelerate the pace of blocking illegal exchanges. Notably, the committee established a 'Digital Economy Crime Task Force' to begin full-scale electronic reviews of illegal information as part of this reorganization. Standard cases requiring deliberation, such as defamation or harmful content, will continue to be reviewed in person by the existing Telecommunications Review Office. Functions related to international cooperation with overseas institutions and businesses have been consolidated into the International Cooperation Center. In addition, under the Planning and Coordination Office, a 'Digital Innovation Team' was created to assemble IT personnel and advance the review support system, including the implementation of artificial intelligence (AI) and work automation. The Rights Protection Bureau has also been reorganized into the 'User Protection Bureau' (comprising the User Protection Planning Team and the Dispute Mediation Team) to strengthen dispute mediation functions.

The BMCC has faced criticism for effectively neglecting requests to block overseas illegal virtual asset exchanges due to repeated review suspensions caused by committee member vacancies, ongoing investigations, and disagreements over standards. Until July of this year, the FIU and BMCC remained at odds. The FIU argued that, under the Act on Reporting and Using Specified Financial Transaction Information, the problem of overseas virtual asset service provider sites could not be viewed as a matter of simple unregistered business operation. The FIU also warned that continued suspension of reviews on the grounds of "ongoing investigation" would only lengthen regulatory gaps, and advocated for a more proactive approach to blocking such exchanges. The BMCC countered that, according to its internal regulations, it must suspend review of cases under investigation, and as it had not yet received an official update from the FIU regarding additional investigation status, it was unable to reverse its previous decision to suspend review. The committee also mentioned concerns that completely blocking a site solely due to it being unregistered could trigger controversy over excessive regulation.

Since 2022, the FIU has requested review for 100 cases of information. Of these, only 62 were decided to be suspended after two meetings held on December 5, 2022, and December 4, 2023. Upon reviewing these 62, only 36 are currently accessible. The majority of the others were either already shut down, had deactivated IP addresses, or, in some cases, the addresses provided by FIU were found to be incorrect. Among the 36 still accessible, certain sites have changed their content since the review request was submitted. The remaining 38 cases have yet to be reviewed. The BMCC plans to begin action on these sites as soon as the standards are established.

The National Assembly is currently accelerating discussions on a second-stage bill to regulate the market comprehensively, dubbed the "Digital Asset Basic Act." The National Policy Committee is pushing to hold a public hearing for the legislative proposal on the 30th, and bills that separately regulate authorization, registration, and notification by business type have already been introduced. The legislative proposal for the Digital Asset Basic Act, sponsored by Assemblyman Min Byung-deok of the Democratic Party in June last year, divides digital asset businesses into 10 categories: trading, brokerage, custody, collective management, wallet management, discretionary management, advisory, order transmission, quasi-advisory, and other related services. Trading, brokerage, and custody businesses require authorization from the Financial Services Commission; collective management, wallet management, discretionary management, and advisory businesses must be registered; order transmission and quasi-advisory businesses are subject to notification. Operating without authorization is punishable by up to five years in prison or a fine of up to 20 million won, operating without registration by up to three years in prison or a fine of up to 100 million won, and operating without notification by up to one year in prison or a fine of up to 30 million won.

Jung Myungho, senior expert member of the National Policy Committee, stated in his review report, "The technological characteristics of digital asset businesses differ depending on type, and the risk factors to the market or users also vary. By categorizing digital asset businesses as proposed, it is possible to design appropriate regulatory or development measures. It is considered a necessary legislative measure, as it is expected that digital asset business operators will be able to provide a variety of services for each category."

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