- South Korea is planning to intensify regulation of crypto mixers
- The country’s Financial Intelligence Unit has been inspired by recent US sanctions on services like Tornado Cash
- Mixers, utilized by crypto thieves to obscure fund movement, face scrutiny, triggering lawmaker outcry.
South Korea is intensifying efforts to regulate crypto mixers in response to rising concerns about their use in money laundering. The Financial Intelligence Unit (FIU) of the Financial Services Commission, South Korea’s primary financial regulator, is leading this initiative, inspired by recent US regulators sanctioning the likes of Tornado Cash and Chipmixer. Mixers are commonly used by crypto thieves as a way of obscuring the movement of their funds, which is why there is such an outcry over them among lawmakers.
Korea Follows in US’ Footsteps
Crypto mixers advertise themselves as being designed for transaction privacy, but they have become associated with illicit activities, prompting global regulatory responses. The US Treasury Department set a precedent by sanctioning Tornado Cash in August 2022 for allowing the laundering over $7 billion in illegally obtained funds, which led to South Korean regulators sitting up and taking notice.
The country has been one of the foremost critics of using cryptocurrencies for potentially illegal practices, banning privacy coins from exchanges. Discussions over banning mixer services began after the US sanctions were applied, emphasizing the need for international cooperation to address crypto mixer challenges. This proactive approach recognizes the risks associated with unregulated digital assets despite South Korea’s prominence in technological innovation and its substantial digital asset market.
Striking a Balance
The measures being explored are likely to include strict monitoring and reporting requirements for virtual asset service providers, especially those offering mixing services, in order to avoid them being used for illicit activity. The Korean government aims to foster blockchain and cryptocurrency sector growth while ensuring safeguards against illegal activities.
Nothing has yet been put forward by regulators to affirm their plans, but it seems that such an action may not be far away.
