South Korea to follow U.S. footsteps on coin mixers with potential sanctions: Report

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South Korean government is reportedly looking to follow in the footsteps of the United States and impose sanctions against using crypto mixing services.

According to a report published in the local daily, the South Korean financial regulator plans to introduce new regulations around virtual asset mixing services akin to the U.S. amid growing use of such services for illegal money laundering operations.

One of the FIU officials revealed that when the U.S. introduced sanctions against crypto mixers, the discussions started in Korea as well. The official further revealed that the discussion around new regulations is in the early phase, and since the U.S. is the only country to have introduced regulations around it, they are definitely a part of the discussion.

A cryptocurrency mixing service is a service that mixes potentially identifiable or “tainted” cryptocurrency funds with others to obscure the trail back to the fund’s original source. While these services were launched focusing on privacy, allowing a sender to obscure their key details over the years, these services became a common way for scammers and hackers to launder their stolen funds.

As a result, the risk of employing crypto mixers to launder money or conceal earnings is considerable. Mixers and online gambling sites have the most severe money laundering issues, as they process the vast majority of dirty currencies. This has prompted the U.S. government to announce various sanctions against popular crypto-mixing service providers over the years.

Related: Blockchain Association files support in suit to lift Tornado Cash sanctions

The first sanction came in August 2022 when the U.S. Treasury Department announced sanctions against Tornado Cash, one of the popular crypto-mixing services. Later, in Nov. 2023, the government announced new sanctions against crypto mixer Sinbad, alleging North Korean ties.

Korean financial regulators, the Financial Intelligence Unit (FIU), are reportedly working on legislation regarding using such crypto mixing services. The report noted that the financial regulator has just begun discussions around the need for such regulations, which might take some time to come into force.

South Korean government is reportedly looking to follow in the footsteps of the United States and impose sanctions against using crypto mixing services.

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