South Korea’s Cabinet approved rules on Aug. 11 that will remove the 1 million won minimum for crypto Travel Rule checks, extending information sharing requirements to every transfer between registered domestic virtual asset service providers.
Summary
- South Korea will apply its crypto Travel Rule to every transfer between registered domestic VASPs.
- Receiving exchanges must obtain sender and recipient information, requesting data or rejecting transfers when necessary.
- Transfers involving overseas exchanges and personal wallets will face risk based restrictions under the amendments.
- Transactions worth at least 10 million won involving foreign platforms or wallets require internal monitoring.
- Travel Rule changes take effect six months after promulgation, unlike registration provisions starting August 20.
The Financial Services Commission said in its official release that the change is designed to stop users from avoiding scrutiny by splitting transfers into smaller amounts.
The decision completes a regulatory process that began earlier this year. The Korea Financial Intelligence Unit had proposed expanding the rule after finding that roughly 60% of transfers between domestic VASPs were below the existing 1 million won threshold.
South Korea crypto Travel Rule will cover every amount
Under the existing regime, the sending VASP must provide originator and beneficiary information when a domestic transfer reaches at least 1 million won. Once the amendments take effect, that minimum disappears and the obligation applies regardless of transaction value.
Receiving platforms will also take on clearer responsibilities. They must secure information supplied by the sender and can request missing information or reject a transfer when required data is unavailable. The FSC cited one suspected evasion case involving about 200 million won used to purchase USDT before 216 withdrawals were made in amounts below 1 million won.
The expansion follows months of regulatory debate. As previously reported in earlier industry coverage, South Korea’s Digital Asset Exchange Alliance had raised concerns about the operational burden created by the wider AML proposal.
Overseas exchanges and personal wallets face new controls
The final rules also create a risk based framework for transfers between registered Korean VASPs and overseas exchanges or personal wallets. Transfers to foreign platforms classified as low risk can proceed, while transactions involving other foreign exchanges or personal wallets will generally require the sender and recipient to be the same person. High risk transactions can be prohibited.
Providers must also build internal suspicious transaction monitoring systems for transfers of at least 10 million won involving overseas VASPs or personal wallets. The requirement reflects regulatory concerns that overseas platforms and private wallets have been used to bypass existing anti money laundering controls.
Notably, the final approach is softer than one element of the March proposal. The earlier draft called for transfers of at least 10 million won involving overseas platforms or wallets to be reported to KoFIU regardless of their risk level. After industry objections, the final Cabinet approved version instead requires providers to operate their own monitoring systems.
Korea moves further than the current U.S. threshold
South Korea’s zero threshold approach will differ from the current U.S. model. FinCEN guidance says the U.S. Travel Rule generally applies to qualifying transmittals of $3,000 or more. South Korea will instead require information sharing for every covered domestic VASP transfer once its new rules become effective.
The change also fits within wider international efforts to increase payment traceability. FATF’s updated standards require virtual asset providers to obtain and retain originator and beneficiary information. In earlier compliance coverage, different thresholds across jurisdictions were identified as a continuing challenge for exchanges operating internationally.
When will the new crypto transfer rules start?
The new transfer requirements do not begin on Aug. 20. The FSC said the VASP registration provisions and rules concerning sanctions on former employees take effect on that date. The Travel Rule expansion and other transfer related AML requirements will instead take effect six months after the decree is formally promulgated.
Existing VASPs also receive a one year grace period for certain new requirements covering debt ratios, staffing, computer infrastructure and internal controls. The broader registration framework will allow regulators to examine financial soundness, senior management qualifications and major shareholders more closely.
The changes add another layer to South Korea’s expanding oversight of cross border crypto activity. In previous cross border coverage, lawmakers had already moved to create registration requirements for businesses handling international virtual asset transfers.
For exchanges and users, the next date to watch is the decree’s formal promulgation because that will start the six month countdown for the new transfer rules. KoFIU also plans continued supervision of VASPs as firms update their systems to handle identity information on transfers that previously fell below the threshold.
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