South Korea will apply its crypto Travel Rule to all transfers between registered virtual asset service providers, removing the 1 million won threshold. The move aims to prevent money laundering and circumventing existing rules.
These regulatory changes in South Korea signal a tightening of AML and KYC standards within the crypto space, potentially impacting how individuals and entities conduct cross-border digital asset transfers and increasing compliance burdens for VASPs.
South Korea is expanding its cryptocurrency Travel Rule to encompass all transfers between registered virtual asset service providers (VASPs), eliminating the previous 1 million won threshold. This decision, approved by the country's Cabinet, aims to bolster Anti-Money Laundering (AML) efforts and prevent the circumvention of regulations through fragmented transactions.
The updated decree mandates that receiving platforms must collect sender and recipient information, with the ability to reject transactions if this data is incomplete. The Financial Intelligence Unit highlighted a case where a user allegedly split large transactions into smaller amounts, each below the 1 million won limit, to bypass the rule.
Furthermore, new AML requirements will be imposed on transfers involving overseas crypto exchanges and personal wallets. Local VASPs will need to assess counterparty risk, permitting transfers to low-risk foreign exchanges and generally allowing transfers to foreign exchanges and personal wallets when the sender and recipient are the same. High-risk transactions will be prohibited.
Platforms will also be required to implement monitoring systems for suspicious transactions exceeding 10 million won that involve foreign entities or personal wallets, addressing an increase in suspected money laundering activities. Registration requirements for crypto service providers are also being enhanced, focusing on financial stability, internal controls, staffing, and infrastructure. The VASP registration provisions are set to take effect on August 20, with existing providers given an additional year for certain compliance aspects, while the expanded Travel Rule and other transfer-related AML measures will be implemented six months after the decree's promulgation.