Dubai regulator takes action against unlicensed crypto firms

South Korea’s cryptocurrency industry is entering a politically sensitive stretch as investors, exchanges, and regulators confront a mix of tax uncertainty, shrinking trading volumes, and growing scrutiny over crypto-linked money laundering. At the center of the debate is the government’s plan to begin taxing crypto gains in January 2027 after three previous delays. Under the current plan, annual crypto profits exceeding 2.5 million won ($1,650) would be taxed at 22%. The framework was first formalized in 2020, but implementation was postponed several times amid concerns over investor protection, market readiness, and political resistance. According to the Hankyoreh newspaper, opposition has intensified after lawmakers scrapped the country’s financial investment income tax, which would have applied to gains from stocks and funds. Critics argue that taxing crypto while most retail stock investors remain exempt from capital gains tax creates an uneven playing field.Photo by Tara Winstead on PexelsCrypto tax petition advancesA public petition calling for the abolition of crypto taxation has already gathered more than 54,000 signatures, clearing the threshold for review by a National Assembly committee. The petitioner argued that the issue needs a full reconsideration, including the possibility of scrapping the tax altogether. The opposition People Power Party has also proposed legislation to abolish the crypto tax, saying it would be inconsistent to impose a separate income tax on crypto assets after eliminating the broader financial investment tax. The ruling Democratic Party, meanwhile, is expected to take up the issue more seriously after the June 3 local elections. The government says there has been no change to its position and that crypto taxation is still scheduled to begin next January. But it has ruled out, at least for now, any renewed discussion on the financial investment income tax, fueling claims that the tax system is treating crypto investors unfairly. The tax dispute comes as Korean crypto exchanges are already grappling with a steep drop in trading activity. Retail investors have been shifting money into equities, drawn by a strong KOSPI rally and momentum in chip and AI stocks, draining activity from the crypto market. According to CoinMarketCap data cited by ETNews, Upbit’s average daily trading volume in the first quarter stood at about $1.55 billion, down 38.8% from the second half of last year. Bithumb’s first-quarter daily average was roughly $647 million, a 44.4% drop over the same period. The decline continued after the first quarter. From Jan. 1 to May 20, Upbit’s average daily volume fell to about $1.38 billion, down 45.5% from the second half of 2025. Bithumb’s average dropped to about $600 million, widening its decline to 48.5%.That slowdown has hit earnings. Dunamu, the operator of Upbit, reported first-quarter operating revenue of 234.6 billion won and operating profit of 88 billion won ($58 million), down 55% and 78% year-on-year, respectively. Bithumb posted revenue of 82.5 billion won ($55 million) and operating profit of just 2.9 billion won ($2 million), down 57.6% and 95.8%, while swinging to a net loss of 86.9 billion won ($58 million). The structural problem is that Korean exchanges still rely heavily on retail spot-trading fees. Unlike major global exchanges, domestic platforms have limited room to expand into derivatives, institutional custody, stablecoin payments, and other higher-margin businesses. Rising compliance costs, including customer verification and anti-money-laundering (AML) upgrades, are adding to the burden. USDT dominates $77M laundering caseSeparately, Korean police said they apprehended 149 suspects accused of laundering about 117 billion won ($77.5 million) through a network linked to a China-based laundering group in Shenzhen, according to the Seoul Economic Daily. Seven suspects were formally arrested, and police said all suspects identified so far are Korean nationals. USDT accounted for 72% of the funds moved, while bogus gift-card operations made up 19% and ordinary bank transfers 9%. Authorities said the scheme used accounts opened under other people’s names and overseas crypto exchanges to make the funds harder to trace. Meanwhile, sentiment among Korean crypto investors remains mixed but not entirely bearish. A weekly survey by CoinNess and Kratos found that 34.1% of respondents expected Bitcoin to rise or surge this week, while 36.3% expected sideways movement and 29.6% expected a decline. Asked whether the crypto market could recover this year, 38.5% said the current downturn looked like a healthy correction with room for a rebound, while 29.7% said the market would not only recover but also set new highs. Combined, 68.2% of respondents expected some form of recovery this year. Still, pessimism remains. Another 17.7% said the crypto market had peaked and was unlikely to rebound, while 14.1% said they had already left the market and no longer had expectations. At the time of publication, Bitcoin (BTC) was trading at $76,677.43, up 0.1% over the past week, reflecting a largely range-bound market. 

As South Korea’s cryptocurrency market rapidly evolves, authorities are working to keep the nation's regulatory framework up to speed. Recent initiatives aim to provide clearer guidelines across the sector, encompassing tax policy adjustments, seized assets, and bank-backed digital tokens.Photo by André François McKenzie on UnsplashGovt tightens control over seized cryptoAccording to Yonhap News, the government has approved a new framework for managing roughly 78 billion won ($54 million) in crypto held by the public sector. The move is aimed at imposing clearer controls over digital assets that state agencies hold, including tokens seized or frozen during investigations. Under the new rules, crypto taken from personal wallets must be transferred immediately into agency-controlled cold wallets kept offline. Sensitive access data, including private keys and recovery phrases, must be split among at least two people rather than left in the hands of a single official. That push for tighter custody comes as South Korea also explores new forms of digital money. A bank-issued product known as a deposit token is emerging as a possible middle ground between private stablecoins and a central bank digital currency, or CBDC. Deposit tokens are digital assets backed by bank deposits. They can function like stablecoins in payments, but they are issued by banks rather than crypto firms. The idea is gaining attention as legal uncertainty around stablecoins drags on. South Korea’s central bank has already moved its CBDC pilot, Project Hangang, into a second phase. The Digital Times reported that two more lenders, Kyongnam Bank and iM Bank, have joined the seven banks that participated in the first round: KB Kookmin, Shinhan, Hana, Woori, NH NongHyup, IBK, and Busan Bank. In practice, the emerging view is that deposit tokens may not compete directly with a future CBDC so much as complement it, especially in everyday payments and settlement where banks already have distribution, compliance, and customer infrastructure. Tax gaps persist as market expandsEven as the payments debate advances, tax policy remains underdeveloped. South Korea is set to begin taxing crypto assets in January 2027, but the National Tax Service still does not have detailed standards for several common types of crypto income, according to the Herald Business. Those include staking, lending, airdrops, hard forks, NFTs, and decentralized finance. In a written reply to a lawmaker’s office, the agency said it is still collecting overseas legislative examples and expert views on what should count as taxable crypto income and how acquisition costs should be calculated. That gap is especially important for offshore activity. Profits earned through overseas exchanges are difficult to track outside the 56 jurisdictions participating in the Crypto-Asset Reporting Framework (CARF), an OECD-developed international regime for sharing tax information on crypto assets. The result is growing concern over uneven tax treatment and the possibility that capital could shift abroad if enforcement remains patchy. At the same time, global stablecoin issuers are trying to deepen ties with Korean institutions. Tether, the company behind stablecoin USDT, has returned to South Korea again this year after visiting in 2025. The Aju Business Daily reported that it has been in talks with players including KB Financial Group and local exchange Coinone, looking for ways to expand trading activity and circulation. Tether has argued that its network could help broaden Korea’s crypto ecosystem, while also promoting its new dollar-pegged stablecoin, USAT, as compliant and secure. The sector’s operational risks are also still visible at the exchange level. Bithumb has begun legal proceedings to freeze assets as it tries to recover seven Bitcoin that it failed to claw back after an erroneous payout during a promotional event in February. At the time, the unrecovered amount was worth about 700 million won ($483,000). The move points to a likely civil suit. According to an industry source cited by Chosun Biz, some customers refused to return the funds, arguing that the mistake was the company’s fault. Legal opinion in South Korea, however, appears to be broadly in Bithumb’s favor if the dispute ends up in court. 

LINE Xenesis and Crypto.com Unite Efforts to Explore Global Blockchain Business OpportunitiesLINE Xenesis, a blockchain developer of Tokyo-based messaging app giant LINE Corporation, has signed a memorandum of understanding (MOU) with Singapore-based cryptocurrency exchange Crypto.com to explore new global business opportunities in the blockchain industry.With the establishment of LINE Blockchain Lab in April 2018, LINE Corporation has conducted research and development on blockchain-based decentralized applications (dApps), peer-to-peer networking systems, and cryptographic techniques. Thanks to this endeavor, LINE not only developed the Finschia blockchain and its native token FNSA, but also launched crypto exchange LINE Bitmax and non-fungible token marketplace LINE NFT.Photo by Shubham Dhage on UnsplashSynergistic goalsThrough this partnership, the two entities will bring together their respective expertise to advance and innovate crypto-related business solutions in Asia and beyond. They will collaborate to increase the liquidity of LINE Bitmax, strengthen crypto payment functions, and promote NFT initiatives.Founded in 2016, Crypto.com has been expanding its services worldwide. In a recent interview, Patrick Yoon, General Manager of Crypto.com Korea, shared the company’s plan to launch its services in South Korea this year. Thus far, Crypto.com has achieved virtual asset service provider registration from the Bank of Spain and secured a major payment institution (MPI) license from the Monetary Authority of Singapore. Meanwhile, despite global progress, the company ceased its institutional offering in the United States last month due to insufficient demand.Asia and beyondCommenting on this agreement, LINE Xenesis CEO Lim Inkyu said, “LINE Xenesis is exploring various ways to collaborate with the world’s leading companies in the virtual asset industry. We are excited to see the synergies created by our partnership with Crypto.com, which has more than 80 million enthusiastic users worldwide, with LINE Xenesis’ blockchain business in Japan. Starting with this collaboration in the Japanese market, we hope to work towards new business opportunities globally based on the technology and knowledge of our two companies.”Crypto.com CEO Eric Anziani echoed this sentiment, saying, “We are excited to partner with such an established and innovative brand in the APAC market and a leader in blockchain technology development in Japan. Enabling real-world utility is critical to our mission of mainstreaming crypto. Through our collaboration with LINE Xenesis, we will facilitate this utility by leveraging our respective expertise with a highly tech savvy base throughout the APAC region.”