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- South Korea’s expanded crypto Travel Rule will cover transactions under $680 to prevent money laundering.
- New restrictions target high-risk offshore exchanges and criminal involvement in crypto services.
- South Korea is working towards finalizing these changes by 2026, aligning with global AML standards.
South Korea is intensifying its anti-money laundering (AML) efforts by expanding its crypto Travel Rule. Starting with transactions under 1 million won (about $680), the government aims to close loopholes that previously allowed criminals to bypass identity reporting requirements by breaking large transfers into smaller sums. This latest regulatory push, announced by the chairman of South Korea’s Financial Services Commission (FSC), Lee Eok-won, is part of a broader strategy to curb illegal activities such as drug trafficking, tax evasion, and money laundering through cryptocurrencies.
Closing Loopholes in Crypto Transactions
The introduction of the expanded Travel Rule will require cryptocurrency exchanges to collect and share both sender and receiver information for all transactions under 1 million won. Previously, users could avoid this reporting requirement by splitting large crypto transfers into smaller, sub-threshold amounts. With this change, South Korean authorities hope to ensure that crypto is no longer used as a tool for illicit activities, especially in cases involving drugs, tax evasion, and international payment schemes.
The crackdown forms part of a series of moves aimed at tightening the country’s regulatory stance on virtual assets, which have become increasingly attractive for money launderers due to their pseudonymous nature. By extending reporting obligations to smaller transactions, South Korea seeks to make it harder for criminals to move illicit funds without detection.
Stricter Oversight for Crypto Exchanges
Alongside the Travel Rule expansion, South Korea is introducing new restrictions on “high-risk” offshore exchanges that pose a significant money laundering risk. These platforms, often operating outside of South Korea’s regulatory scope, will be barred from interacting with South Korean users. In addition, exchanges operating within South Korea will face more stringent financial health reviews, and stricter criteria for registering as Virtual Asset Service Providers (VASPs).
Notably, individuals with criminal records related to drugs or tax crimes will be prohibited from holding major stakes in VASPs. This measure aims to prevent the infiltration of malicious actors into licensed exchanges, ensuring that only reputable individuals hold significant influence over these platforms.
A Comprehensive AML Framework
The expansion of the Travel Rule is the latest in a series of measures aimed at bolstering South Korea’s AML framework. The new policies also include pre-emptive account freezing mechanisms to prevent the disappearance of funds during investigations. The government plans to finalize these changes by 2026, submitting legislative amendments for approval and enhancing collaboration with international bodies such as the Financial Action Task Force (FATF).
Also Read: Binance Returns to South Korea with Gopax Acquisition: Major Crypto Market Move
This move represents South Korea’s most comprehensive AML reform since the update to the Special Financial Information Act in 2021. These sweeping regulations signal South Korea’s commitment to maintaining its position as a global leader in cryptocurrency regulation and fighting financial crimes in the digital age.
With these expanded regulations, South Korea is taking decisive action to protect its financial ecosystem from crypto-based crime. By closing gaps in existing laws and enforcing stricter oversight, the government is sending a strong message that illicit activity in the crypto space will not go unchecked. As global attention on crypto regulation continues to grow, South Korea’s actions could set a precedent for other nations to follow in the battle against financial crime.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
