Recently, there has been renewed turmoil in South Korea’s crypto exchange circles. Representatives of the Korea Digital Asset Exchange Alliance—representing 27 platforms—have lodged a formal objection with the financial regulatory authorities. At the heart of the issue is a new draft amendment to the implementing regulations.

Put simply, the regulator wants exchanges to submit suspicious transaction reports whenever any single cross-border transfer reaches 10 million Korean won. At first, it may not sound too unreasonable, but DAXA’s opposition is actually quite well-founded. The rules completely disregard the principles set by financial intelligence units themselves. They clearly stated, “Low-risk transactions are allowed, while high-risk transactions are restricted.” Yet this draft would label even ordinary cross-border transfers as suspicious.

Most painful of all is the data comparison. Last year, the five largest platforms in South Korea logged roughly 63,000 suspicious transaction reports. Under this new rule, that figure would suddenly surge to 5.4 million. Think about what that means: a sudden increase by dozens of times. Compliance teams would be overwhelmed by reports, while truly risky transaction signals would be diluted.

DAXA also has objections to another proposal—requiring exchanges to verify the accuracy of customer information. They believe there is no clear legal basis for it, calling it regulatory overreach that goes beyond the scope.

This matter vividly reflects the tug-of-war between regulation and the industry right now. On the one hand, anti-money-laundering compliance is indeed necessary. On the other hand, rules that are designed irrationally will instead cause the entire system to fail. The 10 million Korean won threshold and the dozens-of-times jump in report volume—behind these numbers is what the industry is essentially saying: don’t regulate with an all-out flood approach; regulation needs to be more precise.