Illegal Crypto Proxy Payment Services Spread on Telegram as Regulators Squeeze Licensed Firms

So-called crypto proxy payment services, in which users send virtual assets and an operator pays for goods or services on their behalf, are spreading unchecked on Telegram. Dozens of channels promoting the service are active on the platform. Industry officials say the model could be exploited for money laundering, illegal foreign-exchange transfers and other illicit transactions.

A Bloomingbit search of Telegram on May 21 found dozens of public channels, each with anywhere from several dozen to several hundred members, offering virtual-asset exchange and proxy payment services. The channels were soliciting users with phrases such as "cash ↔ crypto," "gift certificates ↔ crypto" and "various pay services ↔ crypto."

The structure is simple. Users deposit crypto according to the instructions, and the operator then pays for the desired product or service on their behalf. Some channels were also advertising specific services, including overseas payment processing, account issuance and SIM card issuance.

The business is illegal under South Korea's Act on Reporting and Use of Specific Financial Transaction Information, which requires virtual-asset operators to register. In a press release issued in December, the Financial Intelligence Unit under the Financial Services Commission said any virtual-asset operator serving Korean nationals is illegal unless it is one of the 27 businesses registered under the law. The FIU also warned users to be cautious of illegal crypto operators active on Telegram and in open chat rooms.

The FIU has identified anonymous stablecoin swaps and crypto-based illegal foreign-exchange transfers as representative forms of unlawful activity. Authorities believe such transactions are highly vulnerable to abuse for money laundering, violations of foreign-exchange law and other crimes.

The challenge is that even when authorities are aware of the services, blocking them is not easy. Hwang Seok-jin, a professor at Dongguk University's Graduate School of International Information Protection, said most of the services operate on overseas servers and Telegram is not structured in a way that makes cooperation with investigators easy. Channels that are shut down often reappear under different names, he added.

Some in the industry say the FIU's tighter rules could instead fuel the growth of this illegal, informal market.

In March, the FIU gave advance notice of proposed revisions to the enforcement decree of the law. The proposal would expand the travel rule, which now applies to transactions of 1 million won or more, to transfers below that threshold as well. It also includes a plan to classify crypto transfer transactions worth 10 million won or more as subject to suspicious transaction reports.

Industry participants worry about a balloon effect, with users shifting to Telegram-based markets with lower regulatory barriers as the compliance burden at licensed exchanges rises.

As regulation tightens, demand for ways around the rules is bound to increase, Hwang said. If authorities sharply strengthen regulation before the market is fully absorbed into the formal system, the informal trading market could grow instead.

He added that stricter regulation could also push domestic funds into overseas markets with lighter rules or into unofficial trading channels. If only users of licensed exchanges face greater inconvenience, debate over the effectiveness of the rules could intensify.