South Korea Moves to Block Illegal Overseas Crypto Exchanges

TLDR

• South Korea is reviewing access blocks for illegal overseas crypto exchanges.
• Regulators may target platforms tied to fraud, laundering, tax evasion, and data leaks.
• The FIU will review proposed blocking criteria for unregistered foreign crypto platforms.
• South Korea plans to tax crypto gains above 2.5M won from January 2027.
• Crypto gains above the annual threshold could face a combined 22% tax rate.

South Korean regulators are reviewing measures to block unregistered overseas crypto exchanges from serving local traders, as the country also prepares to tax crypto gains from 2027.

Regulators Review Blocking Rules for Foreign Exchanges

The Korea Communications Standards Commission and the Financial Intelligence Unit recently discussed new standards for restricting access to foreign crypto platforms. The proposal would focus on exchanges linked to confirmed user harm or criminal activity.

The review covers cases involving investment fraud, money laundering, illegal foreign exchange transactions, tax evasion, and personal data leaks. Authorities are considering faster action when police reports or confirmed investigations show direct damage to users.

The communications regulator suggested using a framework similar to scam-site blocking rules. Under that model, access restrictions could apply when law enforcement confirms fraud or other illegal conduct involving a platform.

The FIU will review the proposal internally before any final measure is adopted. The agency has argued that unregistered platforms create financial crime risks when they target South Korean users without local reporting duties.

Unregistered Platforms Remain Under Review

The discussions follow months of debate between the two agencies over foreign exchanges operating without registration. The FIU has pushed for stronger enforcement, while the communications regulator has raised concerns about blocking websites only because they lack registration.

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Officials are now considering a narrower approach based on evidence of harm. This would allow regulators to act against illegal service providers without treating every unregistered foreign platform the same way.

Major global exchanges remain part of the policy debate. Officials noted that Binance is currently excluded from review after suspending Korean-language services and domestic marketing.

That situation has raised questions over whether foreign platforms can avoid local action by removing Korean-language access while still remaining available to users. Regulators are reviewing how to address such gaps without creating overly broad restrictions.

The latest proposal forms part of South Korea’s wider push to tighten digital asset oversight. Authorities want faster coordination with police when foreign crypto services are linked to fraud, laundering, or tax avoidance.

Crypto Tax Plan Moves Toward 2027 Start

South Korea is also preparing to tax annual crypto gains above 2.5 million won, or about $1,740, starting January 1, 2027. Gains above that threshold would face a 20% national tax, or 22% including local income tax.

The planned tax would apply to income from transferring or lending crypto. The income would be treated separately as “other income” under the current framework.

The tax has already been postponed several times. The measure was originally planned for January 2022, later delayed to 2025, and then pushed to 2027 through a December 2024 amendment.

Deputy Prime Minister Koo Yun-cheol told lawmakers, “We are pushing forward with the plan to tax cryptocurrency starting next year as scheduled.” His remarks indicate the government does not currently plan another delay.

Political debate over the tax remains active in parliament. A bill introduced in March would remove crypto income from the Income Tax Act and cancel the levy.

Opposition lawmaker Kim Sang-hoon criticized the absence of loss carryforwards. He warned that investors could move activity to foreign exchanges, decentralized platforms, or peer-to-peer markets.

Kim also argued that taxation should wait until the OECD’s cross-border Crypto-Asset Reporting Framework becomes fully operational. That system is designed to support information sharing between tax authorities.

Koo said any change would require a broader review of South Korea’s capital-market tax system. Lawmakers must now decide whether to keep, revise, delay, or repeal the crypto tax before the 2027 start date.