The Korean government is tightening its anti–money laundering controls in the crypto sector by expanding the Travel Rule. Under the updated framework, cryptocurrency exchanges and virtual asset service providers must verify the identities of anyone sending or receiving transfers of less than 1 million won (approximately $680).
Financial Services Commission (FSC) Chairman Lee Eun-woon announced the development at the “Anti-Money Laundering Day” event. Under the new directive from the FSC, the so-called “travel rule” (or “crypto real-name system”) will cover all cryptocurrency transactions — including low-value transfers that previously escaped mandatory identity verification.
The regulators claim that for years, cryptocurrency users have been exploiting a significant loophole that allows them to make smaller blockchain transactions. The users were well-positioned to split up larger transfers in a way that does not trigger the system’s requirement for users to verify their identities.
South Korea is now moving to close that gap with new rules that prevent exchanges from treating transfers of less than 1 million won as anonymous. All transactions, regardless of size, must be traceable, and exchanges will be required to collect and share detailed information about the sender and recipient. The aim is to curb “smurfing,” a tactic that enables illicit funds to slip through the system with minimal oversight.
South Korea goes after crime syndicates and rogue platforms
According to the FSC, the expanded rules are aimed at combating illicit activity using cryptocurrencies, including money laundering, tax evasion, drug trafficking, and overseas payment schemes
The South Korean government will prohibit internet users, domestic cryptocurrency exchanges, and foreign Bitcoin exchanges, to which Korean citizens often turn for anonymity or higher trade leverage, from trading their digital currencies in high-risk overseas markets that could pose as potential money laundering havens.
Most have been outside the orbit of national regulatory systems, and many have provided a means for laundering, or passing dirty money around the world without it being traceable to its origin.
By blocking its citizens from accessing such sites, the country hopes to prevent South Koreans from trading in unregulated overseas markets, where they are believed to sell their Bitcoin and other cryptocurrency units through so-called “back doors” for won.
The government is cracking down on companies operating within its borders, which analysts say will have a positive outcome. New players seeking to register as a virtual asset service provider — effectively, legitimate cryptocurrency exchanges — will be subject to stricter financial health checks, focusing on liquidity, capital adequacy, and the safe handling of client funds.
Regulators say that only genuinely fit and proper firms should be entrusted with managing customer assets.
South Korea ramps up all-out defense against crypto crime
While the announcement marks a strong regulatory intent, the full framework is not yet in force. According to the FSC, they intend to finalize the revised regulations in the first half of 2026, with legislative changes to be brought before the National Assembly.
The country is also strengthening its ties with international partners, including the Financial Action Task Force, in an effort to bolster its defences against global money laundering threats.
The cordon and search operation comes weeks after the National Tax Service said it would enforce a policy of raiding homes to confiscate cold wallets and hard drives owned by those believed to be holding digital assets offline in an attempt to evade taxes.
Tax authorities now have advanced analytical tools capable of decoding blockchain activity, and they appear to be actively tracking—and cracking down on—wealth holders who attempt to hide their assets.
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Source: https://www.cryptopolitan.com/korea-expands-aml-rules-to-crypto-transfers/