South Korea targets crypto mixers for anti-money laundering efforts
The new regulations aim to cut off a key avenue used by criminals to launder money.
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South Korea’s financial authorities are seeking to crack down on crypto mixing protocols in a bid to combat money laundering. The Financial Intelligence Unit (FIU) under the Financial Services Commission is developing regulations for the use of these controversial tools, as reported today by local publication Decenter.
Crypto mixers, like Tornado Cash, are services that aim to increase the privacy of crypto transactions by obscuring the link between senders and receivers. While initially designed to enhance user privacy, these tools raise concerns about potential misuse and regulatory scrutiny.
According to an FIU official, crypto mixers are increasingly being manipulated by criminal entities to launder illicit funds in Korea. The new regulations may require digital asset service providers to block transactions associated with these mixers.
Calls for regulating crypto mixers have intensified following an exploit that targeted Orbit Bridge, a platform operated by the Korean blockchain company Ozis. Hackers reportedly drained over $81 million worth of crypto assets, with suspicions that crypto mixers played a role in obfuscating the stolen funds.
The recent steps taken by South Korean authorities reflect a growing global consensus on crypto mixer regulation. The US Treasury Department imposed sanctions on two prominent crypto mixing protocols, Tornado Cash and Sinbad, for allegedly facilitating money laundering by North Korean threat actors, Lazarus Group.
However, creating rules that effectively govern these mixers is complicated. Since crypto transactions happen across borders, countries need to work together to make and enforce these rules. An FIU representative called for coordinated efforts among nations to address this issue.
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