When Does Crypto Trading Violate Korea's Specified Financial Transaction Information Act? Standards and Penalties Explained
Trading virtual assets frequently, or trading large amounts, does not by itself mean that someone has violated Korea's Specified Financial Transaction Information Act (특금법).
What matters most is whether a person carried out virtual asset buying, selling, exchanging, transferring, storing, or brokering as a business for other people — and whether that person, as a Virtual Asset Service Provider (VASP), failed to file the required report with Korea's Financial Intelligence Unit (FIU).
The Supreme Court of Korea has held that whether someone qualifies as a VASP must be judged comprehensively, taking into account the purpose and type of the transactions, their scale and frequency, the period and method of trading, and other relevant circumstances.
Table of Contents
- What Is a Violation of the Specified Financial Transaction Information Act?
- Which Types of Violations Arise in Virtual Asset Trading?
- How Is Personal Coin Trading Distinguished From Operating a Virtual Asset Business?
- Can OTC, P2P, or USDT Trading Also Violate the Act?
- What Are the Penalties for Violating the Act?
- What Should You Check If You Are Being Investigated for a Suspected Violation?
- Frequently Asked Questions
- Summary and Points to Note
1. What Is a Violation of the Specified Financial Transaction Information Act?
A violation of the Act refers to a breach of the reporting, notification, or customer due diligence obligations set out in the Act on Reporting and Using Specified Financial Transaction Information (특정 금융거래정보의 보고 및 이용 등에 관한 법률).
The Act imposes certain obligations on financial companies and Virtual Asset Service Providers (VASPs) in order to prevent money laundering and the financing of illegal activities.
In the virtual asset sector, the issue that most commonly arises for individuals and unregistered operators is operating a virtual asset trading business — while qualifying as a VASP — without filing the required report with the FIU.
Accordingly, what matters is not simply the fact that coins were traded, but rather for whose benefit and through what structure the trading was carried out, and whether it was conducted continuously and repeatedly as a business.
[Related Legislation] Act on Reporting and Using Specified Financial Transaction Information — Korea Law Information Center
2. Which Types of Violations Arise in Virtual Asset Trading?
In the virtual asset sector, issues can arise not only from operating without registration, but also from failing to file required notifications or changes of registration, and from breaching anti-money laundering obligations.
These can generally be divided into the following categories.
Unregistered virtual asset business
This refers to operating a virtual asset trading business — while qualifying as a VASP — without filing the required report with the FIU.
Depending on the actual structure of the trades, even individual-to-individual OTC or P2P transactions may be found to constitute an unregistered virtual asset business.
Failure to file required notifications or changes of registration
Even a VASP that has already filed a report must file a notification of change, following the procedure set out in the Act, whenever the details of its original filing change.
In particular, from August 20, 2026, the amended Act and its subordinate regulations take effect, tightening VASP registration requirements. Under the amended system, the scope of screening expands to cover the legal violation history, financial status, and social credibility of controlling shareholders, and a VASP's organizational structure, personnel, IT systems, and internal control system also become substantive elements of the registration review.
In addition, notifications relating to controlling shareholders and the compliance system will shift from after-the-fact filing within 14 days of the change to advance filing 30 days before the change takes place. If a matter subject to advance filing is carried out before it has been accepted by the authorities, criminal penalties or administrative sanctions may follow — so VASPs planning changes to their governance structure or compliance system should check the filing timeline well in advance.
[Related Source] Financial Services Commission & Korea Financial Intelligence Unit, "Comprehensive Revision of the VASP Registration Manual in Line With Strengthened VASP Registration Requirements" (Aug. 13, 2026)
3. How Is Personal Coin Trading Distinguished From Operating a Virtual Asset Business?
Whether someone qualifies as a VASP is not determined by transaction amount or frequency alone.
The Supreme Court has held that the following factors must be considered together:
- The purpose and type of the transactions
- The scale and frequency of the transactions
- The period over which the trading continued
- The specific method of trading
- Whether the trading was carried out for another person's benefit
- Whether consideration was received for the trading
The Court found that an ordinary user who buys, sells, or exchanges virtual assets on an exchange solely for their own benefit and on their own account is, absent special circumstances, unlikely to be treated as a VASP. On the other hand, a person who continuously and repeatedly trades virtual assets for an indefinite number of customers or users, and receives consideration for doing so, may in principle qualify as a VASP.
Criteria for distinguishing personal trading from a virtual asset business
| Category | Personal Virtual Asset Trading | Trading Likely to Be Treated as a Virtual Asset Business |
|---|---|---|
| Purpose of trading | Personal investment or asset management | Providing trading convenience to another person |
| Counterparty | Self-directed trading through an exchange | Customers or an indefinite number of users |
| Source of funds | Mainly the trader's own funds | Involvement of customer or third-party funds |
| Profit | Capital gains from investment | Fees, spreads, or other trading consideration |
| Method of trading | Based on the trader's own judgment | At another party's request |
| Continuity | Depends on investment circumstances | Continuous and repeated in a set manner |
A large trading volume does not, on its own, make trading a virtual asset business if it was conducted with the trader's own funds. Conversely, even a relatively small trading volume may require a review of VASP registration obligations, if the trader repeatedly bought and sold coins at the request of multiple people and received consideration for doing so.
[Related Case Law] Supreme Court, Judgment of Dec. 12, 2024, Case No. 2024Do10710
4. Can OTC, P2P, or USDT Trading Also Violate the Act?
Trading virtual assets through OTC or P2P methods does not, by itself, make the trading illegal. What matters is the actual structure of the transactions.
If a person purchases USDT with their own funds and trades it on their own account, this is likely closer to ordinary investment activity. On the other hand, the following types of trading warrant a review of whether they constitute an unregistered virtual asset business:
- Repeatedly buying and selling USDT or other assets at the request of multiple people
- Receiving Korean won and sending the corresponding virtual asset to the other party's wallet
- Continuing to trade while receiving fees or spreads
- Brokering or carrying out another person's virtual asset trading, exchange, or transfer on their behalf
Accordingly, what matters is not simply the trading volume, but whose funds were used, how the counterparties were found, and what consideration was received.
5. What Are the Penalties for Violating the Act?
The severity of the penalty depends on which reporting obligation was breached.
Criminal penalties for violations of the Act
| Type of Violation | Penalty |
|---|---|
| Operating a virtual asset business without filing a report with the FIU | Imprisonment for up to 5 years, or a fine of up to KRW 50 million |
| Filing a report through false or fraudulent means and operating a business | Imprisonment for up to 5 years, or a fine of up to KRW 50 million |
| Failing to file a required notification of change | Imprisonment for up to 3 years, or a fine of up to KRW 30 million |
| Filing a notification of change through false or fraudulent means | Imprisonment for up to 3 years, or a fine of up to KRW 30 million |
These statutory penalty ranges remain unchanged under the amended Act, which takes effect on August 20, 2026.
That said, actual cases also take into account the period and scale of trading, the profit obtained, and each party's role and degree of involvement. Depending on the trading method used, it is also necessary to separately review whether charges such as violation of the Foreign Exchange Transactions Act, fraud, or offenses related to proceeds of crime may also apply.
6. What Should You Check If You Are Being Investigated for a Suspected Violation?
The first step is to organize all trading activity into transactions made for your own investment and transactions made on behalf of others. A large volume of account deposits and withdrawals or virtual asset transactions does not, on its own, reveal the true nature of the trading.
Before an investigation, it is worth reviewing the following materials:
- Trading and transfer records from exchanges and personal wallets
- Deposit and withdrawal records for accounts used in the trading
- KakaoTalk, Telegram, or other messages exchanged with counterparties
- The actual profit structure, such as fees or spreads received
- How each counterparty was found, and the role each participant played
In particular, if funds were repeatedly received in Korean won from multiple people and virtual assets were sent in return, it is essential to first trace the flow of funds and determine which deposit corresponds to which virtual asset transaction. Based on this, you should be able to explain whether you were an investor trading on your own account, or someone who continuously and repeatedly carried out virtual asset trading on behalf of others.
7. Frequently Asked Questions
Q1. Does trading coins frequently automatically mean I have violated the Act?
Frequent trading alone does not constitute a violation. If the trading was carried out for your own benefit and on your own account, it may qualify as ordinary virtual asset investment. However, if you repeatedly traded at another person's request and received consideration for doing so, this requires separate review.
Q2. If I buy USDT low and sell it high, do I need to file a report?
Earning a profit from the price difference alone does not make someone a VASP. The determination depends on whether the profit came from personal investment, or from repeatedly supplying USDT to customers while receiving fees or spreads.
Q3. Is it a problem if I bought coins on behalf of an acquaintance as a favor?
A one-off favor and continuous, repeated conduct of this kind must be distinguished. Relevant factors include the number and period of the transactions, whether consideration was received, and how far the range of counterparties expanded.
8. Summary and Points to Note
Whether a violation of the Act has occurred is not determined by the amount or frequency of virtual asset trading alone. The key factor in distinguishing personal investment from an unregistered virtual asset business is whose funds were used, for whose benefit the trading was carried out, and what consideration was received.
In addition, from August 20, 2026, the registration review and certain notification-of-change procedures for VASPs will be strengthened, so existing operators should also confirm the requirements and filing deadlines under the revised registration manual.
Decent Law Firm reviews VASP status, violation risk under the Act, and investigation response strategy based on the structure of virtual asset transactions and the flow of funds involved.
