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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CME Breakdown Highlights Institutional Retreat

CME’s open interest began declining just before the sharp market movements in October. The drop from $17 billion to $9.8 billion is largely linked to decreased profitability of the “basis trade” strategy, frequently used by institutional investors. This structure, which involves buying spot Bitcoin while selling futures contracts, lost its appeal as the futures price premium narrowed.

Velo data shows the annualized basis rate fell from around 15% to roughly 3%, signaling a disrupted risk-reward balance for institutional capital and making position reduction a rational choice. CME open interest once peaked at $23 billion when Bitcoin approached $100,000, highlighting the scale of the recent unwind.

Retail Investors Push Positions Higher

Open interest on Binance also fluctuated since October but shifted upward in December. Retail investors’ dip-buying behavior has driven futures positions higher, even as institutional participation remains cautious. This divergence shows that shorter-term, higher-risk trades are gaining weight, while it remains unclear whether this trend is permanent or a temporary reaction.

ETF Outflows Signal Caution, But Story Isn’t Over

U.S. spot Bitcoin ETFs reflect waning institutional interest. Farside Investors data shows net outflows of $19.3 million on Monday, marking the seventh consecutive day of withdrawals.

BlackRock’s iShares Bitcoin ETF (IBIT) saw $7.9 million in redemptions, while Fidelity’s FBTC recorded $5.7 million in modest inflows. ARK 21Shares and Invesco Galaxy products also show continued institutional liquidation, reflecting both year-end tax optimization and heightened market caution.

Bitcoin Price Volatility Persists, Risks Partially Rise

Bitcoin dropped more than 2% over the past 24 hours, trading around $87,200. Intraday fluctuations ranged between $86,717 and $90,299, while trading volume increased roughly 40%, indicating sustained market interest despite uncertainty.

Technically, analysts note that Bitcoin is approaching the lower bands of the rainbow chart, historically a zone between $60K and $80K, associated with weaker market phases. CoinGlass data shows mixed sentiment in the derivatives market; total futures open interest fell over 5% in 24 hours, with CME declining and Binance seeing a slight increase in the short term.

The market has yet to clarify whether institutional sell-offs or retail buying will dominate, but current data suggest that risk still leans downward.

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