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Why Was I Classified as a “Virtual Asset Service Provider”?

Many people perceive their conduct as nothing more than simple promotion, operational support, referral activity, customer assistance, or community management.

Some believe they never held or managed virtual assets themselves, and that a separate party operated the platform.
 

However, in practice, this perception is often not accepted as it stands.
 

Investigative authorities do not focus on labels or contractual form, but on the degree of actual involvement. What matters is how one contributed to attracting investors, how the activity was connected to the revenue structure, and whether such conduct was carried out continuously or repeatedly.
 

At this stage, many individuals first experience a sense of crisis, realizing, “I didn’t know this could be illegal to this extent.” In reality, many virtual asset–related cases begin not with clear criminal intent, but with poor judgment and misunderstandings about the structure of the business.
 

This article aims to provide practical guidance for those facing similar concerns. Please read the following carefully, as it outlines key issues that should not be overlooked.
 

Legal Definition and Criteria for Determining a Virtual Asset Service Provider

1) Statutory Definition

Under Article 2(1)(h) of the Act on Reporting and Using Specified Financial Transaction Information and Article 2(2) of the Virtual Asset User Protection Act, a “virtual asset service provider” refers to any person who, as a business, engages in activities related to virtual assets, including

① buying or selling,
② exchanging,
③ transferring,
④ safekeeping or managing, or
⑤ brokering, arranging, or acting as an intermediary.
 

Pursuant to Article 7 of the Specified Financial Information Act, virtual asset service providers must report to the head of the Financial Intelligence Unit (FIU).

Any person who conducts virtual asset transactions as a business without filing such a report is subject to criminal penalties of up to five years’ imprisonment or a fine of up to KRW 50 million (Article 17(1) of the same Act).
 

2) Standards Established by Supreme Court Precedent

In determining whether a person qualifies as a virtual asset service provider, the Supreme Court has held that the key inquiry is whether the individual continuously and repeatedly engages in virtual asset transactions for profit.
 

This determination must be made reasonably, based on social norms, by comprehensively considering factors such as the purpose, type, scale, frequency, duration, and manner of the transactions
(Supreme Court Decision, December 12, 2024, Case No. 2024Do10710).
 

The Court further clarified that a general user who continuously and repeatedly trades or exchanges virtual assets solely through an exchange for their own account and benefit would, absent special circumstances, be unlikely to qualify as a virtual asset service provider.
 

However, a person who continuously and repeatedly conducts virtual asset transactions for the benefit of an unspecified number of customers or users, and receives compensation in return, may in principle be deemed a virtual asset service provider (Supreme Court Decision, September 11, 2025, Case No. 2024Do12420).

3) Practical Factors Considered in Investigations

Investigative authorities prioritize substance over form. In practice, the likelihood of being classified as a virtual asset service provider increases when the following factors are combined:
 

• Access to or ability to manage investor funds or virtual assets

• Substantial involvement in transaction execution, operation, or intermediation

• A profit-oriented revenue structure, such as fees, performance-based compensation, or referral commissions

• Continuity, organization, and repetition of the activity
   

Common Misunderstandings

1) “I Only Lent My Name” or “I Only Provided Technical Support”

Such arguments are rarely accepted in practice. In criminal proceedings, courts focus not on formal titles or contractual arrangements, but on the actual performance of tasks and the allocation of profits.
 

Where a conspiracy or joint participation is recognized, even a person who handled only part of the operations may be held jointly liable for the entire offense (Criminal Act, Article 30).

2) Overseas Exchanges, Foreign Corporations, or Offshore Servers

Formal structures such as overseas exchanges, foreign entities, or relocating servers abroad do not, in themselves, constitute grounds for exemption from liability.
 

Under Articles 3 and 6 of the Criminal Act, both Korean nationals and foreign nationals who commit crimes within the territory of the Republic of Korea are subject to Korean criminal law, and Korean nationals may also be subject to Korean law for crimes committed abroad.
 

Accordingly, if a business structure targeting domestic users is identified, Korean criminal law may apply regardless of server location or place of incorporation.

3) “I Can File a Report Later”

This assumption can lead to irreversible consequences.
 

Article 17(1) of the Specified Financial Information Act imposes criminal penalties of up to five years’ imprisonment or a fine of up to KRW 50 million on those who conduct virtual asset transactions as a business without filing a report. Such violations cannot be cured through ex post reporting.
 

Moreover, to file a valid report as a virtual asset service provider, requirements such as

① obtaining Information Security Management System (ISMS) certification, and
② securing real-name verified deposit and withdrawal accounts

must be satisfied (Article 7(3) of the same Act).
 

Even if these requirements are met at a later stage, criminal liability for previously unreported business operations cannot be avoided.
 

This is therefore a matter that should never be taken lightly.
 

Decent Law Firm’s Assistance – Why Immediate Intervention Is Critical

The most dangerous scenario in virtual asset cases arises when investigative authorities have already structured the case internally on the assumption that the individual is a virtual asset service provider, while the individual themselves remains unaware of this classification. In such circumstances, explanations offered may function not as a defense, but as confirmation.
 

Decent Law Firm’s approach begins by dismantling and reassessing the structure of the case.
 

We separate operational, promotional, technical, and financial elements by function and timeline, reorganizing the actual scope of involvement and examining whether the classification as a service provider itself can be contested.
 

At the same time, we assess whether there is room to avoid designation as a principal or accomplice, and how far criminal liability may extend.
 

Beyond criminal defense, we also evaluate long-term administrative risks, including FIU sanctions and future reporting restrictions. At this stage, the need for professional intervention is clear.
 

A single misstep can lead to irreversible consequences.
 

If you have already been contacted by authorities or informed of a potential change in your legal status, this is not a matter to assess on your own.
 

In virtual asset service provider cases, the initial response strategy effectively determines the outcome. If you are reading this, you are still at a point where a strategic response can be formed.