South Korea to Expand Crypto Travel Rule to Transactions Below $700 in Anti-Money Laundering Initiative

South Korea to Extend Crypto Travel Rule to Sub-$700 Transactions in AML Clampdown

South Korea is set to implement a rigorous crackdown on cryptocurrency-related financial crimes by broadening its travel rule requirements.

Key Takeaways:

South Korea will extend its crypto Travel Rule to include transactions of less than $700, closing a loophole previously used to avoid identity verification.
Cryptocurrency exchanges will be mandated to conduct comprehensive Know Your Customer (KYC) checks for smaller transactions and will face enhanced scrutiny regarding their financial and compliance practices.
The government plans to block high-risk overseas platforms and restrict criminals from having ownership stakes in licensed cryptocurrency firms.

The updated threshold will apply to transactions under 1 million won (approximately $680), which previously allowed users to evade identity checks by splitting larger transfers into smaller amounts, as reported by Yonhap News.

South Korea’s FSC Head Commits to Strengthening Crypto AML Measures

During a briefing to the National Assembly’s Legislation and Judiciary Committee, Financial Services Commission (FSC) Chairman Lee Eok-won confirmed this initiative on Wednesday. He indicated that authorities would increase scrutiny on cryptocurrency exchanges that are frequently exploited for money laundering and tax evasion.

“We will take action against crypto money laundering by expanding the Travel Rule to encompass transactions under 1 million won,” stated Lee.

Currently, South Korea's travel rule primarily applies to more significant transfers, requiring exchanges to gather and share identifying details of both senders and recipients. This new proposal aims to eliminate existing loopholes, compelling crypto platforms to enforce the same disclosure requirements on smaller transactions often used to bypass reporting.

Once this change is enacted, exchanges in South Korea will need to collect comprehensive identity information from users engaging in low-value trades and transfers.

Regulators believe these measures will greatly reduce the use of digital assets for illicit overseas remittances and unreported income.

In addition, the FSC intends to impose stricter regulations on "high-risk" offshore exchanges that facilitate transactions for Korean users without being licensed domestically. These platforms will be prohibited if identified as posing increased risks of fraud or money laundering.

With these changes, crypto exchanges will also undergo more rigorous evaluations of their financial stability. The government plans to expand the criteria for Virtual Asset Service Provider (VASP) registration, assessing whether platforms maintain sufficient reserves, internal controls, and compliance mechanisms.

The updated regulations will also prevent individuals with prior convictions related to tax offenses or drug crimes from becoming significant shareholders in licensed cryptocurrency firms, aiming to thwart criminal networks from gaining influence over regulated platforms.

South Korea’s Financial Intelligence Unit to Gain Pre-Emptive Freezing Authority

The Financial Intelligence Unit (FIU) is set to acquire pre-emptive account-freezing powers in severe cases, enabling investigators to freeze suspicious accounts before the funds can be moved beyond recovery.

Officials anticipate submitting legislative amendments to the National Assembly during the first half of 2026. Additionally, South Korea is increasing collaboration with global regulators, like the Financial Action Task Force, to align with international standards.

According to reports, there are growing concerns that South Korea's virtual asset taxation, set to commence in January 2027, might experience a fourth delay due to ongoing infrastructure deficiencies and unclear regulatory frameworks.

Despite having approved the tax law five years ago in 2020, authorities have struggled to establish essential systems for transaction monitoring, income classification, and cross-border enforcement after three postponements.