South Korea is tightening its grip on cryptocurrency oversight with plans to extend its Travel Rule to transactions as low as 1 million won, roughly US$680.
The announcement by Financial Services Commission Chairman Lee Eok-won at the 19th Anti-Money Laundering Day ceremony signals a stronger push against illicit financial activity in the digital asset space.
The Travel Rule, also known as the “cryptocurrency real-name system,” traditionally required Virtual Asset Service Providers (VASPs) to share sender and receiver details for larger crypto transfers.
By lowering the threshold to 1 million won, South Korea aims to prevent criminals from splitting transactions into smaller amounts to evade detection.
Lee said during a National Assembly committee session,
“We will crack down on crypto money laundering […] expanding the Travel Rule to transactions under 1 million won.”
Alongside this, the FSC plans to block transactions with high-risk overseas exchanges, targeting platforms that pose an elevated money laundering risk.
Financial Services Commission Chairman Lee Eok-won at the National Assembly in Yeouido, Seoul, on 26 November.
The regulator will also increase scrutiny on VASP shareholders, assessing financial stability, criminal records, and social standing to prevent individuals with histories of drug offences or tax evasion from holding major positions in licensed firms.
Authorities highlight that the expanded regulations aim to curb the use of cryptocurrencies in tax evasion, drug trafficking, and other illicit overseas payment schemes.
Exchanges will undergo rigorous evaluations, and the Financial Intelligence Unit (FIU) will introduce pre-emptive account freezing measures for serious offences to prevent funds from disappearing during investigations.
These measures follow previous actions by South Korea’s National Tax Service, which in October announced it would conduct home searches and seize cold wallets or hard drives of users suspected of hiding crypto assets to avoid taxes.
The NTS also indicated it would analyse tax delinquent histories using specialised crypto-tracking software to identify potential offline concealment.
Individual users and exchanges will face stricter reporting and verification requirements even for smaller transfers.
VASPs will need to enhance compliance systems to handle increased monitoring, while legitimate users may benefit from a safer trading environment with reduced illegal activity.
The regulations also signal a wider focus on ensuring investor protection and market transparency.
Implementing these expanded rules presents logistical and technological challenges.
Tracking a larger number of smaller transactions demands advanced systems and substantial resources, while exchanges must maintain user convenience alongside compliance.
Effective coordination between regulators, VASPs, and international authorities, such as the Financial Action Task Force, will be essential to enforce these measures successfully.
While Lee Eok-won unveiled the plans on 28 November, the FSC has yet to finalise implementation timelines.
Legislative amendments are expected to be submitted to the National Assembly in the first half of 2026, aligning with a broader strategy to strengthen anti-money laundering regulations following updates to the Special Financial Information Act in 2021.
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