REGULATION

In response to the hacking of Orbit Bridge, South Korean regulators will take action to combat the illegal use of mixers.

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In response to the hacking of Orbit Bridge, South Korean regulators will take action to combat the illegal use of mixers.

The financial regulatory authority in South Korea recently announced that it is considering introducing specific regulatory measures to combat the abuse of cryptocurrency mixers, in order to prevent them from being used as a tool for money laundering by criminal organizations. This move reflects growing concerns that mixers, originally designed to protect privacy, are increasingly being used for illicit financial activities.

Mixer Services Under Scrutiny

Cryptocurrency mixers, also known as "mixers," work by fragmenting digital assets and redistributing them to multiple wallet addresses to obscure transaction trails and user identities. While these services were initially intended to protect the privacy of users with large amounts of funds, they have become tools for money laundering, including by criminals such as hackers.

According to an official from South Korea's Financial Intelligence Unit (FIU), the lack of specific sanctions against mixers currently increases the risk of their use for money laundering. Proposed regulations may limit the involvement of virtual asset service providers in mixer-based transactions.

South Korea has issued a recent announcement on the revision of the "Special Financial Transactions Law," which strictly prohibits service providers from offering anonymous coin trading services.

Academic Perspectives

A professor from the East University Information Security Research Institute emphasized that these regulations aim to prevent the laundering of stolen assets through exchanges and uphold market integrity.

Domestic Emergency

Driving the urgency of these measures is the recent hacking incident of the Korean cross-chain bridge, Orbit Bridge. Hackers exploited the protocol to steal various digital assets worth around 81 million USD, and it is speculated that these assets have been laundered through mixers.

Aftermath of Orbit Bridge Hack｜Loss of 80 Million USD Reported to Exchanges and Law Enforcement

International Cooperation

This policy aligns with international trends and actions taken by other regulatory bodies, such as the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN), which recently established anti-money laundering (AML) regulations for mixers.

U.S. Fully Regulates Mixers! Financial Institutions Required to Report Relevant Transactions

FinCEN has also sanctioned the mixer Sinbad, frequently used by the North Korean hacker group "Lazarus" for money laundering..

There is a global consensus on the need for regulatory intervention concerning mixers, primarily to prevent their abuse by illicit actors. However, due to the novelty of this discussion and the requirement for international coordination, establishing a specific regulatory framework may take some time. The FIU stated that it intends to observe the situations in other countries and plans to closely cooperate with international regulatory bodies to combat the misuse of mixers.