South Korea expands Crypto Travel Rule to all VASP transfers, drops 1 million won threshold

South Korea is removing the 1 million won (about $700) cutoff from its crypto Travel Rule, so the rule will now cover all transfers between registered virtual asset service providers (VASPs). For PSPs and exchanges, that means more transfers will need sender and recipient data attached, with fewer places to hide small-splitting workarounds.

1. South Korea’s Cabinet approved amendments to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information on Tuesday. Once promulgated, the expanded Travel Rule will apply to all transfers between registered crypto service providers regardless of value.
2. Receiving platforms will be required to obtain sender and recipient information and may request missing data or reject transactions when the required information is unavailable. The Financial Intelligence Unit said the change is meant to stop users from splitting transfers into smaller amounts to get around the rule.
3. The FIU pointed to one case where a user bought Tether USDt (USDT) after depositing about 200 million won into a crypto exchange, then made 216 withdrawals, each worth less than 1 million won. That is the kind of structuring the threshold made easier on paper.
4. The amendments also add new Anti-Money Laundering (AML) requirements for transfers involving overseas crypto exchanges and personal wallets. Registered local VASPs will have to decide which transfers to allow based on the counterparty’s risk, permit transfers to low-risk overseas exchanges, and generally allow transfers involving other foreign exchanges and personal wallets when sender and recipient are the same person.
5. Transactions involving counterparties deemed high risk will be prohibited. Crypto platforms must also build their own suspicious transaction monitoring systems for transfers worth at least 10 million won involving foreign exchanges or personal wallets. South Korean authorities said suspected money laundering involving overseas exchanges and personal wallets has increased because gaps in existing AML rules have been exploited.

The decree also tightens registration requirements for crypto service providers, including financial health, internal controls, staffing and infrastructure standards, while expanding scrutiny of major shareholders. The VASP registration provisions take effect on Aug. 20, while existing providers get an additional year to comply with some financial, staffing, infrastructure and internal control requirements. The expanded Travel Rule and other transfer-related AML requirements take effect six months after the decree is promulgated.