South Korea sees 152-fold jump in crypto money-laundering cases; "Hwanchigi" linked to $6.4 billion
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South Korea reported a sharp surge in crypto-linked money laundering cases driven by the "Hwanchigi" method, with $6.4B in illicit flows since 2021 and USDT cited as the main rail. The data highlight escalating compliance and enforcement risks, increasing the likelihood of tighter controls on stablecoin on/off-ramps and scrutiny of unlicensed FX channels. Short term, this can weigh on stablecoin-related liquidity and regional risk appetite.
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A cross-border laundering technique known as "Hwanchigi" (money exchange) has emerged as the dominant channel for crypto-linked crime in South Korea, according to BeInCrypto. From 2021 through August 2025, illicit cryptocurrency transactions tied to Hwanchigi reached $6.4 billion, representing more than 90% of the country's $7.1 billion in total illegal crypto activity over the same period.
The method moves criminal proceeds overseas via cryptocurrency transfers, bypassing South Korea's regulated banking system. In the first half of 2026, authorities recorded 1,214 virtual-asset money-laundering cases, a 152-fold rise from eight cases for all of 2025. These incidents made up 79.4% of all crypto-related crimes during the period, with USDT cited as the main instrument.
Enforcement outcomes have trailed the surge in cases. Police arrested 18 people in the first half of 2026, well below the 42 arrests recorded in 2023.
Separately, South Korean customs reported seizing KRW 7.2 trillion (about $49.2 billion) in illegal foreign-exchange transactions over the same period, with more than 90% of the funds routed through unlicensed channels.
