Financial authorities are preparing to issue cryptocurrency mixing-specific regulations in South Korea to stop criminal groups from using these tools to launder funds obtained illegally. The Korean authorities are discussing whether to allow virtual asset service providers (VASPs) to reject transactions from these privacy-enhancing services.
South Korea Starts Discussing Cryptocurrency Mixing Regulations
Korea might enact regulations against cryptocurrency mixing platforms in the future. According to local reports, the Financial Intelligence Unit (FIU) would be considering the introduction of a legal framework targeting cryptocurrency mixing platforms, aiming to curb illegal money laundering by criminal groups.
The Korean authorities would be studying if to allow virtual assets service providers (VASPs) to reject transactions from addresses having used these services.
Mixing, a process that encompasses the obfuscation of the origin of the funds of a transaction or a series of transactions, has been targeted by the U.S. Treasury Department Financial Crimes Enforcement Network (FinCEN), which has proposed rules that seek to increase the transparency around platforms providing these services.
In October, the Office of Foreign Assets Control (OFAC) sanctioned Sinbad, a mixing platform linked to the North Korean hacking collective Lazarus. In August 2022, the office also flagged Tornado Cash, an Ethereum-based mixing platform.
The stance that the U.S. is taking on virtual assets mixing platforms has influenced the regulatory discussions now taking place in Korea. A FIU official stated:
Last year, when the United States introduced mixer regulations, discussions began in Korea as well.
These are only early talks about the issue, and a definitive decision on the subject is not expected to be announced anytime soon, given the nascent trait of the problem and the lack of international coordination in facing it. Another FIU officer stressed:
Mixing is an issue shared internationally, so cooperation from each country is necessary. As this is the first system introduced by the United States, international discussions have not yet progressed in depth.
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