By Why Is South Korea Removing The Travel Rule Threshold?
South Korea will apply its crypto Travel Rule to all transfers between registered virtual asset service providers, eliminating the current 1 million won, or roughly $700, minimum as regulators tighten controls designed to prevent money laundering through digital assets.
The Cabinet approved amendments to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information on Tuesday. Once the new transfer rules take effect, registered crypto platforms will have to collect sender and recipient information regardless of the transaction size.
Receiving platforms will also be required to obtain the necessary customer information and will be able to request missing details or reject transfers when the required data cannot be provided.
The Financial Intelligence Unit said removing the 1 million won threshold is intended to prevent users from avoiding reporting requirements by breaking large transfers into smaller transactions.
Authorities cited a case in which a user deposited about 200 million won into a cryptocurrency exchange, purchased Tether’s USDT and then completed 216 withdrawals, with each transaction kept below the existing 1 million won threshold.
Under the new system, dividing a large transfer into multiple smaller withdrawals would no longer remove those transactions from Travel Rule requirements when funds move between registered service providers.
How Will Overseas Exchanges And Personal Wallets Be Treated?
The amendments also introduce additional Anti-Money Laundering requirements for transfers involving overseas cryptocurrency exchanges and personal wallets, extending supervision beyond transactions between locally registered platforms.
South Korean VASPs will be required to assess the risk of the counterparty before deciding whether a transfer can proceed. Transfers involving overseas exchanges classified as low risk will generally be permitted.
For other foreign exchanges and personal wallets, transfers will generally be allowed when the sender and recipient are the same person. That requirement is intended to give platforms a clearer link between the customer initiating a transaction and the person controlling the destination account or wallet.
Transactions involving counterparties that platforms classify as high risk will be prohibited.
The changes place more responsibility on local exchanges to evaluate where customer assets are being sent rather than relying only on transaction size. Platforms will need processes for identifying counterparties, verifying ownership where required and deciding whether an overseas service presents an acceptable money-laundering risk.
Investor Takeaway
South Korea is moving from a transaction-size approach toward counterparty-based crypto supervision. Users may face more checks when transferring assets to foreign exchanges or personal wallets, while local platforms will carry greater responsibility for determining which transfers can proceed.
What Transfers Will Receive Extra AML Scrutiny?
Registered crypto platforms will also have to establish their own suspicious transaction monitoring systems for transfers worth at least 10 million won involving foreign exchanges or personal wallets.
Authorities said suspected money laundering involving overseas platforms and self-controlled wallets has increased as users exploit gaps in existing AML requirements. The new framework is designed to give exchanges greater visibility into transactions that leave South Korea’s regulated crypto sector.
The approach creates different controls depending on the destination. Transfers between registered domestic VASPs will fall under the expanded Travel Rule regardless of size, while transactions involving overseas exchanges and personal wallets will be subject to counterparty risk assessments and additional monitoring for larger transfers.
For users, the practical effect could include more requests for information about wallet ownership, destination exchanges and the purpose of certain transfers. Transactions may also take longer when platforms need to obtain missing data or conduct additional compliance checks.
When Will The New Crypto Rules Take Effect?
The decree also tightens registration standards for virtual asset service providers. Regulators will assess financial health, internal controls, staffing and infrastructure requirements while increasing scrutiny of major shareholders.
The VASP registration provisions will take effect on Aug. 20. Existing service providers will receive an additional year to meet some of the new financial, staffing, infrastructure and internal control requirements.
The expanded Travel Rule and the other transfer-related AML provisions will take effect six months after the decree is promulgated, giving exchanges time to update transaction monitoring, customer verification and counterparty assessment systems.
The changes could raise compliance costs for South Korean crypto businesses, particularly smaller operators that must build systems capable of reviewing every domestic VASP transfer while also assessing foreign exchanges and personal wallets.
For larger regulated exchanges, the rules may create a higher operating burden but also make regulatory approval more valuable as South Korea raises the requirements for companies handling digital asset transfers. The next test will be how exchanges classify foreign counterparties and how frequently legitimate wallet transfers are delayed or rejected once the new controls begin.