I. OVERVIEW
On December 2, 2025, the Korea Financial Intelligence Unit (the “KoFIU”) issued a press release (the “Press Release”) stating that except for the 27 virtual asset service providers (“VASPs”) officially registered with the KoFIU pursuant to the Act on Reporting and Using Specified Financial Transaction Information (the “Financial Transaction Reports Act”), all other virtual asset service providers (“VASPs”) conducting business directed to the Korean market, are considered illegal operators.
In the Press Release, the KoFIU identifies three major types of illegal virtual asset business activities:
1. Stablecoin exchanges conducted through Telegram or open chat rooms,
2. Blog or social-media promotions/referrals for unregistered VASPs, and
3. Illegal exchanges using virtual assets through currency exchange businesses.
This newsletter discusses the key issues relating to each of the types of illegal virtual asset business activities discussed in the Press Release and their implications from a regulatory perspective.
II. MAIN POINTS AND IMPLICATIONS
1. Criteria for Determining Illegal Virtual Asset Service Providers
In the Press Release, the KoFIU reiterates that any VASP conducting business directed towards Koreans is subject to a reporting obligation under the Financial Transaction Reports Act.
It states that if a VASP, regardless of whether it is domestic or foreign: (1) provides a Korean-language website, (2) supports KRW-denominated payments, or (3) conducts events or marketing activities soliciting Korean users, then it would be conducting business directed to Koreans, and thereby, would be obligated to file a report with the KoFIU pursuant to Article 7(1) of the Financial Transaction Reports Act. Failure to do so constitutes operation as an illegal unregistered VASP, and such unregistered VASPs may be subject to criminal penalties under Article 17(1) of the Financial Transaction Reports Act.
This is consistent with the KoFIU’s previously established position, which has been reiterated multiple times since 2022.* The Press Release introduces examples involving new types of activities that have emerged recently and that may constitute illegal unregistered VASPs. However, the interpretation of the points raised in the Press Release is unclear in certain aspects, such as which specific behaviors are deemed unlawful and which parties are considered violators.
* Prior Press Releases:
– Aug. 18, 2022: “Please exercise particular caution when using or dealing with unregistered VASPs.”
– Aug. 7, 2025: “Please exercise particular caution when using or dealing with unregistered VASPs.”
2. [Type 1] Anonymous Stablecoin Exchanges Conducted Through Telegram/Open Chat Rooms
The KoFIU identifies stablecoin transactions facilitated via Telegram or open chat rooms as a major category of illegal virtual asset activities. Examples include: (1) USDT trades conducted through offline and online OTC transactions, and (2) Exchanging USDT for Chinese yuan through currency exchange businesses.
These examples suggest that continuously and repeatedly engaging in profit-driven “P2P transactions” directed towards Korean users, whether conducted onshore or offshore, constitutes engaging in VASP business activities that require relevant VASP registrations. Although P2P transactions can be perceived as non-commercial (i.e. not business activities), the KoFIU’s explanation in the Press Release indicates that the same criteria for determining illegal VASPs apply when P2P trading is conducted regularly and for commercial purposes.
3. [Type 2] Promotion or Referral of Unregistered Virtual Asset Service Providers via Blogs or Social Media
The Press Release states that promotion or referral of unregistered VASPs is illegal. However, it does not clarify (1) which specific statute/regulation is being violated and (2) who is the actual person or entity in violation.
Therefore, the key question to consider for this type is ‘if a VASP that is not listed on the KoFIU’s “unregistered VASP list” (see the KoFIU’s reference materials dated Aug. 7, 2025, Appendix 1—the “Blacklist”) engages in promotional or referral activities for its own services using a referral program, does this always constitute illegal conduct, placing the operator at risk of being added to the Blacklist?’
It appears reasonable to interpret that the risk of being added to the Blacklist arises only when promotional or referral activities using referral programs are deemed to constitute business activities directed towards Koreans. We discuss examples for illustration purposes below:
(1) Where a VASP operates a global referral program through its official website or similar media channels, and the relevant content is provided in English such that the primary target participants are unspecified and not limited to a certain nationality, while Korean users can be included, it is unlikely to regard this as business activity directed towards Korean users. However, please note potential issues as illustrated below:
|
Where a Korean user participating in a global referral program offered by an overseas exchange voluntarily posts a Korean-language referral advertisement on their personal blog websites (e.g. Naver) in order to receive referral rewards:
-
Since the exchange merely provides a global referral program and did not request or instruct the posting of the Korean-language referral advertisement, the exchange cannot be regarded as conducting business directed towards Korean users. Thus, the exchange is not in violation of the Financial Transaction Reports Act and should not be considered as unregistered VASP to be included in the KoFIU’s Blacklist.
-
However, as a matter of practice, it is often difficult to determine from external appearances whether the Korean individual who posted the Korean-language referral advertisement did so pursuant to a promotional agreement with the exchange, or whether they acted independently for their own benefit.
-
For this reason, even if a Korean user voluntarily posts a Korean-language referral advertisement, there is a risk that such conduct may be misinterpreted as having been carried out by the exchange and raises the risk of being included in the KoFIU’s Blacklist (and the exchange must proactively provide explanations to resolve the issue with the regulatory authorities or other exchanges).
-
Therefore, it would be advisable for exchanges, even when offering global referral programs, to consider measures, etc., to post warning notice or disclaimer such as “Promotional or referral activities directed towards residents of specific jurisdictions are strictly prohibited.”
|
(2) In contrast, where a VASP enters into a promotional agency agreement with a social media influencer or similar individual and provides monetary compensation for Korean-language posts, thereby actively conducting business directed towards Korean users, the VASP is highly likely to be included on the Blacklist as an unregistered VASP under the Financial Transaction Reports Act.
Illegal VASPs included on the Blacklist may be reported to investigative authorities on suspicion of violating the Financial Transaction Reports Act and may become subject to various sanctions, including criminal penalties under Article 17(1) of the Financial Transaction Reports Act. In addition, such VASPs may face app-download restrictions imposed by platform operators (Google, Apple) and prohibitions on KRW deposits and withdrawals with domestic VASPs (Article 7(1) of the Financial Transaction Reports Act; Article 10-20(4) of its Enforcement Decree).
Furthermore, the individuals participating in referral activities may also be treated as having aided and abetted an unregistered VASP, potentially being considered accomplices or co-perpetrators acting in concert under criminal law, and thus may face criminal liability alongside the unregistered VASP.
4. [Type 3] Illegal exchanges using virtual assets through currency exchange businesses
The KoFIU refers to a case where an operator of a currency-exchange shop engaged in unregistered foreign-exchange business by recruiting remittance clients through Telegram, receiving stablecoins from an overseas sender, converting them into cash via a domestic exchange, and then paying the cash to the domestic recipient (a case detected by the Korean customs authority). The KoFIU warns that such conduct may violate not only the Financial Transaction Reports Act but also the Foreign Exchange Transactions Act.
The Press Release alone does not seem to suggest that stablecoins themselves fall directly within the regulatory scope of the Foreign Exchange Transactions Act, but rather emphasizes that when stablecoins are used illicitly to circumvent anti-money laundering (AML) obligations imposed on financial institutions during foreign-currency remittance processes, violations of the Foreign Exchange Transactions Act may arise on the basis of breaching remittance-related compliance obligations.
In essence, this type of conduct involves using stablecoins as a vehicle to circumvent compliance obligations applicable to foreign-currency remittances. The KoFIU appears to view such behavior as potentially violating both (i) the AML obligations imposed on financial institutions under the Financial Transaction Reports Act and (ii) the reporting or registration requirements under the Foreign Exchange Transactions Act.
III. IMPLICATIONS
This Press Release is notable in that the KoFIU has expanded the criteria for identifying illegal VASPs by presenting examples of newly emerging business practices.
Going forward, both domestic and foreign VASPs should carefully review any contemplated marketing activities in advance to determine whether such conduct could expose them to the risk of being placed on the Blacklist or subject the business—or individuals involved—to potential criminal liability. Proactive assessment will be essential for mitigating legal and regulatory risks.
Bae, Kim & Lee LLC remains committed to supporting our clients with the highest level of expertise and diligence.
* * *
For any inquiry or questions regarding the content of this newsletter, please contact us.
[Korean version]
