South Korea eliminates minimum threshold for crypto Travel Rule, expands AML rules

South Korea is set to remove the minimum threshold for its crypto Travel Rule, requiring all transfers between registered virtual asset service providers (VASPs) to comply with the regulation, regardless of transaction size. The move follows the Cabinet’s recent approval of proposed amendments to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information. All transfers now subject to Travel Rule The revised law means every crypto transfer between registered service providers will now fall under the Travel Rule, ending the previous 1 million won (approximately $700) exemption. Receiving platforms must collect detailed sender and recipient information. If information is missing, platforms are expected to request the required data or, when necessary, reject the transaction outright. The Financial Intelligence Unit explained that removing the threshold is aimed at closing loopholes that allowed users to evade oversight by splitting large transfers into multiple smaller ones. Officials pointed to a case in which an individual reportedly deposited roughly 200 million won into a crypto exchange, converted the funds into Tether USDt ($USDT), and made 216 consecutive withdrawals, each just under the reporting threshold. Authorities maintain that the policy shift is essential to prevent users from circumventing regulations by dividing large sums into a series of smaller transactions. As a result, every transfer between registered providers, irrespective of value, will need full compliance as authorities work to tighten oversight and prevent money laundering activities. Stricter anti-money laundering for overseas exchanges and wallets The new amendments also establish more rigorous anti-money laundering (AML) obligations for transfers involving overseas crypto exchanges and personal wallets. Under the revised framework, local registered VASPs must assess the risk profile of counterparties for all outbound transactions. Transfers to overseas platforms deemed low risk are permitted, but those involving high-risk foreign exchanges are prohibited. Transfers to or from personal wallets and non-local exchanges will generally be allowed provided both sender and recipient are the same individual. Platforms must install their own suspicious transaction monitoring systems, specifically for transfers of at least 10 million won that involve foreign exchanges or personal wallets. South Korean regulators indicated that financial crime involving cross-border exchanges and personal wallets has grown, exploiting gaps in the current AML landscape. These measures follow growing concerns about the exploitation of South Korea’s existing policies by those seeking to sidestep regulatory scrutiny. The government seeks to address these vulnerabilities by enhancing identification, transaction tracking, and suspicious activity monitoring. New standards for service provider registration The latest amendments also expand requirements for VASP registration. These include stricter standards regarding financial stability, internal governance, personnel, and technical infrastructure. Regulatory authorities will now increase scrutiny of major shareholders as part of assessing registration eligibility. The new VASP registration rules come into effect on August 20.