South Korea is set to broaden its crypto “Travel Rule” so it applies to essentially all on-chain transfers between regulated virtual asset service providers, eliminating a previously used value threshold. The change is part of Cabinet-approved amendments to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information, approved on Tuesday by the country’s government.
The update is designed to close loopholes that allowed some users to avoid Travel Rule compliance by breaking up transactions into smaller pieces. Alongside the Travel Rule expansion, the amendments tighten anti-money-laundering (AML) controls for transfers involving overseas exchanges and personal wallets.
Key takeaways
- South Korea will remove the 1 million won threshold, making the Travel Rule apply to transfers between registered VASPs regardless of transaction size.
- Receiving platforms will need to collect sender and recipient information, and can request missing data or reject transactions when required information isn’t available.
- The amendments introduce new AML obligations for transfers involving foreign exchanges and personal wallets, including restrictions based on counterparty risk.
- New monitoring requirements apply to certain cross-border transfers, and the rules are supported by a cited example involving repeated withdrawals under the old threshold.
Travel Rule broadened beyond the value threshold
Under the new framework, South Korea’s Travel Rule will cover all transfers between registered virtual asset service providers (VASPs), not just those above a set minimum amount. The Financial Intelligence Unit (FIU) said the threshold could be circumvented by splitting transfers into smaller transactions, thereby reducing the likelihood that required compliance steps would be triggered.
The FIU referenced a case involving Tether USDt (USDT). According to the agency, a user deposited roughly 200 million won into a crypto exchange and then made 216 withdrawals, with each withdrawal valued below 1 million won—illustrating how repeated small transfers could be used to structure activity around the prior limits.
By removing the threshold, the government aims to make the compliance requirement more consistent. In practical terms, the amendments require receiving platforms to obtain sender and recipient information for incoming transfers subject to the rule. If information is missing, the receiving VASP may request the necessary details. Where required data cannot be obtained, it may reject the transaction.
Risk-based AML rules for foreign exchanges and personal wallets
The Cabinet-approved amendments also add AML requirements tied to counterparty risk for transfers involving overseas crypto exchanges and personal wallets.
Registered local VASPs will be expected to decide which foreign transfers to allow based on the risk profile of the counterparty. Transfers to overseas exchanges assessed as low-risk would generally remain permitted. Transactions involving other foreign exchanges and personal wallets would be allowed when the sender and recipient are the same person—reflecting a tighter standard for cross-actor transfers.
Where the counterparty is classified as high risk, the amendments indicate those transactions will be prohibited. The government’s rationale is that suspected money laundering involving overseas exchanges and personal wallets has increased, and that weaknesses in existing AML coverage for those channels have been exploited.
In addition to the risk-based gating, the rules require crypto platforms to build out monitoring capabilities. The decree calls for suspicious transaction monitoring systems for transfers worth at least 10 million won when the transfer involves foreign exchanges or personal wallets.
Broader compliance expectations for registered VASPs
Beyond Travel Rule and transfer screening, the amendments also strengthen the broader regulatory foundation for crypto service providers. The decree strengthens registration requirements by expanding scrutiny of elements including financial soundness, internal controls, staffing, and infrastructure standards. It also broadens oversight of major shareholders, reflecting a more intensive approach to operator accountability.
The government’s intent appears twofold: first, to reduce opportunities to route around compliance through transaction structuring; and second, to bring more systematic AML oversight to cross-border and self-custody-related flows, where authorities have indicated existing rules have been insufficient.
When the changes take effect
The VASP registration provisions will take effect on Aug. 20. However, current providers will receive an additional year to meet certain requirements related to financial, staffing, infrastructure, and internal control obligations.
For the Travel Rule expansion and the related transfer-related AML obligations, the amendments take effect six months after the decree is promulgated. That staggered timeline gives exchanges and other regulated providers time to adjust compliance systems—particularly around sender/recipient data handling and counterparty risk assessments.
With these updates, South Korea is moving toward more comprehensive transmission of transfer information across regulated rails while simultaneously tightening controls for cross-border activity and personal wallet flows. Investors, traders, and users should watch for how exchanges implement sender/recipient data requests, what counterparty risk models they publish internally, and how strictly they will enforce rejections when required information can’t be provided—changes that could affect user experience for transfers just as much as they affect compliance outcomes.
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