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The South Korean government is considering imposing sanctions on the use of crypto mixing services, according to a recent report by the South Korean financial regulator, the Financial Intelligence Unit (FIU). The move would follow the example set by the United States amid growing concern over the use of mixers for illegal money laundering operations.
Cryptocurrency mixing services combine potentially identifiable “tainted” funds with others to obscure the trail back to the original source. While launched for privacy reasons, over time, they have become a common money laundering tool for criminals. As a result, there is considerable risk in using mixers to conceal funds or launder money.
South Korea Weighs Crypto Mixer Rules
According to the report, South Korea’s Financial Intelligence Unit (FIU) has begun discussing introducing regulations around digital asset mixing services similar to those in the US. An FIU official said the talks started after the US introduced sanctions on crypto mixers, adding that discussions are still in the early stages.
The report notes the FIU has just started considering the need for mixer regulations, a process that could take significant time. While few details are available, any new rules would likely restrict or punish the use of mixing services for illegal activities.
Mixers and online gambling sites have the most severe money laundering problems, processing the vast majority of dirty digital currencies. This has led the US government to announce various sanctions against major crypto-mixing platforms.
The first came in August 2022 when the US Treasury Department sanctioned Tornado Cash, a popular mixer. Later, in November 2023, the government announced additional sanctions against the Sinbad mixer over alleged North Korean ties. These actions set a precedent South Korea is now considering following.
Crypto Mixers Obscure Illicit Funds
By mixing potentially identifiable cryptocurrency funds with others, mixers help obscure the trail back to the original source. As a result, over time, they have become a common way for criminals and scammers to launder stolen digital funds, even though they were created to provide users with more privacy.
Figures show that mixers and online gambling sites have the most severe cryptocurrency money laundering problems. They are responsible for processing vast amounts of illegally obtained digital currencies. This has made them a target for regulators and law enforcement seeking to crack down.
As discussions continue in South Korea, additional details around potential crypto mixing regulations will likely emerge. However, early indications suggest the government aims to follow the US lead in restricting their use for illegal money laundering and sanctions evasion. The precedent is set, and South Korea appears poised to take similar action targeting mixer services.
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