Exclusive: South Korea May Block Access to DeFi as FSC Report Urges Curbs on ‘Unlicensed’ Operators

A report prepared for South Korea’s financial authorities concluded that decentralized finance, or DeFi, should effectively be treated as an unlicensed operator. The finding raises the possibility that the government could impose measures such as restricting access to DeFi services.

Government officials said on June 30 that the Korea Institute of Finance submitted the report to the Financial Services Commission in the first half of this year. The report was titled “A Study on Phase-Two Virtual Asset Legislation and Measures to Improve Anti-Money Laundering Rules for Stablecoins.” The institute conducted the research from September to December 2025 at the commission’s request.

The report concluded that DeFi services sit in a regulatory gray area and require regulatory intervention. The Korea Institute of Finance wrote that most decentralized operators, including DeFi platforms, fall under unclear jurisdictions and are difficult for any one country to supervise. Given those limits, it recommended classifying them as “unlicensed virtual asset operators” and actively using steps such as restricting domestic users’ access and trading.

DeFi uses blockchain to provide financial transactions without intermediaries such as banks. Hyperliquid, a global decentralized exchange whose token trades under the ticker HYPE, was cited as a representative DeFi operator. Because of DeFi’s decentralized nature, it is difficult to identify a specific entity that operates or provides the service. That helps explain why clear DeFi regulations remain hard to find not only in South Korea but also in major jurisdictions including the US and the European Union.

The problem becomes more acute when DeFi is used for crime or causes losses for users. Because the operating entity is difficult to identify, authorities face practical limits in monitoring and supervising the sector. The institute said virtual asset businesses subject to anti-money laundering and counter-terrorism financing rules should be interpreted broadly and that those obligations should also be imposed on DeFi.

International coordination on DeFi regulation could strengthen as early as this year. Earlier in June, Lee Hyeong-ju, head of the Financial Intelligence Unit under the Financial Services Commission, attended a plenary meeting of the Financial Action Task Force in Paris, where officials discussed ways to coordinate DeFi regulation. FATF plans to publish a DeFi-related report in July. The Financial Intelligence Unit said it would actively participate in discussions on implementing FATF international standards to prevent money laundering and related risks.

The Financial Services Commission commissioned the study in the second half of 2025 as part of its work on a Digital Asset Basic Act. South Korean ministries typically use such reports as key support for legislation. That means the report could be reflected in the government’s draft of the basic law. An industry official said DeFi regulation is effectively absent in South Korea and that if work on the basic law resumes in earnest, discussions are likely to include tougher DeFi rules.