South Korea Expands Crypto Travel Rule in Major AML Overhaul

The government of South Korea has announced a sweeping update to its anti-money-laundering (AML) regulations in the cryptocurrency sector. Under the new framework, even relatively small crypto transfers — those above 1 million KRW (≈ US $680) — will now trigger stringent “travel-rule” requirements. The change aims to curb illicit money flows, drug-trafficking payments, tax evasion and other criminal use of digital assets. 

What’s Changing: Expanded Scope for “Travel Rule”

Previously, South Korea’s application of the “Travel Rule” — a compliance standard adopted from global guidelines by the Financial Action Task Force (FATF) — applied primarily to larger or cross-border crypto transfers. Under the revised norms announced by the Financial Services Commission (FSC), all domestic virtual-asset service providers (VASPs) will now be obliged to collect and share complete identification data of both the sender (originator) and the receiver (beneficiary) for transfers at or above the 1 million KRW threshold. 

Specifically, VASPs must record:

• Originator’s name and wallet address
• Beneficiary’s name and wallet address

For transfers crossing regulatory thresholds or where authorities request further details, the VASPs must also provide official identity numbers or registration details within a short time window. 

Why the Change — Closing Loopholes, Preventing Abuse

Regulators in Seoul said the update is motivated by concerns that smaller transfers were being used to evade identity-verification rules, allowing criminal actors to “smurf” transactions—splitting large volumes into smaller ones to avoid detection. The new rule aims to close that loophole by lowering the compliance threshold. 

According to FSC chairperson’s statement to the National Assembly’s Legislation & Judiciary Committee, the expanded Travel Rule is part of a broader AML crackdown intended to counter money-laundering, tax evasion, illegal overseas payments and illicit financial flows often routed through crypto channels. 

What This Means for Exchanges, Users and the Market

For domestic cryptocurrency exchanges and other VASPs, the regulatory burden will increase substantially. Compliance will now entail enhanced “Know Your Customer” (KYC) measures, continuous record-keeping, and readiness to share transaction metadata on demand. VASPs may also need to meet additional security and auditing standards under the broader regulatory overhaul. 

Investors and crypto-asset users must also adjust: wallets must be linked to verified identity, transfers — even small ones — will leave traceable data trails, and anonymity will be significantly reduced. This could deter misuse but may also discourage users valuing privacy.

Broader Regulatory Context: Korea’s Crypto Reforms Accelerate

South Korea has been gradually tightening regulation of its crypto sector. Since 2021, VASPs have been mandated to register with the national financial intelligence unit and comply with AML-KYC obligations. The Travel Rule first took effect in 2022 for high-value or cross-border transfers. 

Under the larger regulatory overhaul, authorities are also planning additional measures — including stricter audits, mandatory real-name accounts, enhanced due diligence for overseas transfers, and blocking high-risk foreign exchanges from operating with Korean users. 

Potential Impact — Risks & Opportunities

On one hand, the tightened rules may significantly reduce illicit activity, improve transparency, and align South Korea with global standards set by FATF. For regulators and legitimate exchanges, this boosts credibility and may attract more institutional investment due to stronger compliance assurances.

On the other hand, increased compliance costs, higher operational burden, and reduced anonymity may squeeze smaller exchanges and discourage privacy-focused users. Some market consolidation could occur as less compliant platforms exit the market or pivot to non-fiat models. Observers also warn that excessive regulation might hamper crypto innovation.

Global Significance — What This Means for Crypto Regulation Worldwide

South Korea’s move signals a growing trend: leading jurisdictions are increasingly bringing cryptocurrency under the same rigorous regulatory lens as traditional finance. As global watchdogs push for AML and counter-terrorism compliance, national regulators are responding — often aggressively.

For countries watching closely, the Seoul model may become a template: balance between crypto adoption and enforcement; combining innovation with accountability. For crypto users and businesses globally, the message is clear: compliance is no longer optional. Transparency, KYC, and cooperation with authorities may define the future of digital assets.

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