Last week, the agency revealed a $290 billion gap between reported trade values and bank records. As a result, KCS announced year-round intensive inspections to tackle illegal money flows.

Cosmetic Surgery Used to Mask Transfers

From September 2021 to June 2025, the network moved crypto assets from abroad into South Korean digital wallets. Then, it converted the funds into local currency.

To disguise the transfers, suspects labeled them as cosmetic surgery or education expenses. Consequently, authorities had difficulty detecting the flow at first.

Key Details of the Operation

• Route Tracked: Crypto assets were bought in multiple countries and transferred into South Korean accounts.

• Illegal Scheme: Investigators believe the network exploited foreign exchange fluctuations to move capital overseas.

• Market Context: South Korea’s crypto market reached $64.6 billion in June 2025. Daily trading averaged $4.3 billion, explaining why stricter oversight is expected.

Eyes on New Regulations

The South Korean Supreme Court ruled that Bitcoin can be seized as an asset. This strengthened the legal basis for prosecuting crypto-based money laundering.

Moreover, a 2025 inspection found that 97% of examined companies were linked to illicit transactions. KCS officials announced intensified inspections targeting underground banking operations that threaten foreign exchange stability. As a result, those relying on crypto anonymity face increasing scrutiny.

Crypto Market Under Increased Oversight

Following the network’s collapse, the market is closely watching KCS’s regulatory measures. South Korea remains a global crypto leader, but rising transaction volumes have increased the need for tighter regulation.

Supreme Court rulings empowering authorities to seize crypto assets have further strengthened prosecutorial control. Therefore, KCS has made it clear that it will take a zero-tolerance approach to illegal underground banking. Investors now monitor how these inspections will affect local liquidity and pricing.

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Acting Chair Caroline Pham stated that the current legal framework could be applied without the need for new regulations. She emphasized that spot crypto assets could be traded through designated contract markets (DCMs). This approach directly conflicts with the SEC’s securities interpretations. 

CFTC-registered DCM platforms like CME Group and ICE Futures US operate under strict supervision and customer protection measures. The plan would allow these platforms to list physically settled crypto contracts. 

However, Pham opposes complex regulations similar to Europe’s MiCA. She advocates for streamlined and effective solutions to maintain the U.S.’s market leadership. 

SEC-CFTC Conflict 

Some legal experts warn that the plan carries significant risks. Andrew Rossow, CEO of AR Media Consulting, pointed out that crypto assets cannot be rigidly categorized. According to Rossow, assets may acquire security characteristics over time, threatening regulatory stability. 

The CFTC’s authority is limited to leveraged or collateralized transactions conducted only through DCM platforms. Meanwhile, the SEC still classifies many cryptocurrencies as securities under the Howey Test. 

Rossow emphasized that this dual framework doesn’t align with the dynamic nature of crypto assets. Even if investors comply with CFTC rules, they may face retroactive SEC enforcement actions. 

Moreover, this situation could trigger various legal consequences such as unregistered securities trading or brokerage violations. Consequently, even if the plan is implemented, a lack of coordination between agencies increases risks. 

CFTC Moves to Accelerate Crypto Regulation in the U.S. 

Caroline Pham aims to implement spot crypto regulations within 12 to 18 months, positioning the U.S. as a global crypto hub. 

However, without resolving uncertainties around securities-commodity distinctions, such steps could lead to further legal confusion. Also, listings made without clear investor protections may undermine trust. 

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Led by the Crypto Task Force, these roundtables were announced shortly after Commissioner Paul Atkins revealed the new initiative. The SEC intends to build a more inclusive and regulatory-friendly environment within the crypto ecosystem. Priority will be given to projects that have fewer than ten employees and have been operating for less than two years. 

The first meeting will be held on August 4 in Berkeley, California. Additional sessions will follow on August 19 in Boston and September 4 in Dallas. Chicago and New York will host the next roundtables on September 15 and September 25, respectively. 

Small Projects Take the Spotlight at SEC Roundtables 

In the past, SEC roundtables primarily featured major players like BlackRock and Fidelity. This time, however, the focus shifts to less recognized startups. 

Commissioner Hester Peirce stated that the agency wants to hear from those who haven’t previously participated in policymaking. The goal is to ensure new regulatory frameworks are suitable not only for large corporations but also for small and innovative teams. 

Meanwhile, Project Crypto also addresses foundational regulatory issues, such as the classification of digital assets and the registration of crypto products. Additionally, the SEC is working toward transitioning U.S. financial markets to on-chain infrastructures. 

Three more meetings are scheduled in October: Irvine on the 3rd, Cleveland on the 24th, and Scottsdale on the 29th. The final two roundtables will take place on November 12 in New York and December 5 in Ann Arbor. 

Project Crypto Signals a New Era in SEC’s Approach to Web3 

With Project Crypto, the SEC demonstrates a more open approach toward the digital asset ecosystem. Through this initiative, the agency aims to deepen engagement with industry stakeholders across the country. Meanwhile, FED member Kugler announced that she will resign on August 8

These upcoming sessions offer critical opportunities for voices left out of prior regulatory processes. They also help democratize future policy development. 

Ultimately, the SEC is using Project Crypto as a platform to reshape its relationship with the crypto sector—one roundtable at a time.

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CLARITY and GENIUS Votes 

Among the key regulations during Crypto Week, the 2025 Digital Asset Market Structure Clarity Act (CLARITY) stands out. This bill seeks to end the regulatory turf war between the SEC and CFTC. It also aims to bring clarity to asset classifications and prevent legal ambiguities like the Ripple vs. SEC case. This has implications for both individual and institutional investors. 

Meanwhile, the Guiding National Innovation and Ensuring Uniformity in Stablecoins Act (GENIUS) introduces strict safety requirements for stablecoin issuance. Passed in the Senate in June, it mandates 1:1 cash reserves, formal registration, and compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) laws. It’s also designed to prevent collapses like Terra (UST). Some officials propose combining both bills into a single comprehensive package. 

CBDC Ban and Political Tensions 

Another major proposal during Crypto Week is the Anti-CBDC Surveillance State Act, which seeks to block the Federal Reserve from issuing a digital dollar. Supporters argue that a CBDC could undermine financial privacy and enable centralized surveillance. 

However, Democrats have launched a counter-campaign named “Anti-Crypto Corruption Week”, accusing the CLARITY and GENIUS bills of serving Donald Trump’s interests. 

Additionally, on Tuesday, July 15 at 3:00 PM, the Senate Agriculture Committee will hold a session on market structure legislation. On Wednesday, July 16 9:00 am ET, the House Ways and Means Committee will discuss crypto taxation. 

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