South Korea Tightens Crypto Oversight to Track Hidden Assets

• KDIC gains clear legal power to request full crypto transaction histories from exchanges.
• FSC interpretation closes gaps that once limited access to transfer and balance records.
• Oversight expands as Korea accelerates broader investigations of digital asset flows.

South Korea’s financial regulators have tightened their grip on digital asset oversight, resolving a long-standing ambiguity in the nation’s depositor protection framework. According to reports, the latest decision grants the Korea Deposit Insurance Corporation authority to obtain detailed transaction histories from licensed virtual asset service providers.

Regulators say the clarification closes enforcement gaps that persisted despite last year’s amendments to the Depositor Protection Act. Officials further argue that the expanded access is essential to ensure digital assets cannot slip outside investigative reach during financial disputes or insolvency cases.

FSC Clarifies Data-Access Powers

A legal interpretation released by the Financial Services Commission confirms the KDIC can request transaction and transfer histories held by domestic exchanges. The ruling may sound procedural, but for regulators it resolves a question that had slowed some investigations: whether the law’s definition of “required data” covered only account-level information or extended to transactional logs held by crypto platforms.

The FSC’s view is now explicit. The amended law, which took effect in September 2024, brought digital asset operators under the KDIC’s data-submission rules. Officials say excluding transaction records would defeat the point of the reforms, which aim to trace assets in bankruptcy cases and financial disputes where individuals might attempt to hide wealth in digital markets.

According to the interpretation, KDIC requests may encompass any property or business data “necessary for demanding compensation for damages, exercising subrogation rights, or participating in litigation.” Regulators added that this includes digital asset balances and histories tied to insolvent individuals or connected parties.

Closing a Loophole in Enforcement

The original 2024 amendment was driven by unease inside the government that crypto platforms could become blind spots in investigations. Insolvency cases in particular had highlighted how digital assets might be shifted or concealed beyond the reach of traditional banking inquiries.

Until now, however, regulators were unsure whether the KDIC could compel the same depth of information from exchanges as it could from banks. The FSC’s interpretation removes that uncertainty. Officials say the earlier ambiguity had allowed some actors to exploit a grey zone between custody data and transaction logs, leaving investigators without a clear view of asset flows during financial distress.

Implications for Market Oversight

The move aligns with South Korea’s broader regulatory posture, which has hardened in stages over the past three years. The Virtual Asset User Protection Act, enacted in 2023 and fully enforced as of July 2024, already gives authorities the right to inspect platforms, sanction unfair trading activity, and require exchanges to hold customer assets in segregated accounts.

It also mandates reporting of suspicious activity, part of a wider effort to curb manipulation and safeguard retail funds. With the KDIC’s new reach, the agency’s traditional mandate widens. Founded in 1996 to protect depositors and maintain system stability, the corporation now finds itself increasingly involved in digital asset tracing when insolvency or litigation surfaces.

Industry Reaction and Regional Context

Upbit, Bithumb, and other licensed exchanges operating in Korea are expected to comply with KDIC inquiries, though some industry voices have quietly raised concerns about balancing regulatory demands with user privacy obligations.

Analysts say the development fits a regional trend: East Asian financial authorities have accelerated oversight of digital markets as AML scrutiny and cross-border enforcement intensify.

Related: RLUSD Doubles to $1.5B in Under Six Months as Ripple Expands Global Deals

A Broader Regulatory Push

The clarification arrives as Korean regulators prepare additional measures targeting suspicious trading patterns. Officials have signaled that advanced monitoring tools, including AI-driven surveillance under the Financial Supervisory Service, will play a larger role in market oversight.

Ultimately, the FSC’s stance closes a structural gap in the Depositor Protection Act by placing digital asset transaction histories on the same footing as traditional financial data. It marks another step in Seoul’s ongoing effort to build a cohesive framework around an industry that has often moved faster than regulation itself.