South Korea to Tighten Crypto Tracking on Transfers Below 1 Million Won

South Korea to Tighten Crypto Tracking on Transfers Below 1 Million Won — New Regulations Coming Soon

South Korea is set to enhance its oversight of cryptocurrency transfers under 1 million won in a move aimed at curbing illicit fund movements. This initiative follows the establishment of a task force by the Korea Financial Intelligence Unit (FIU) and will expand existing regulations to cover smaller transactions, addressing growing concerns about money laundering through smurfing.

Key Takeaways

South Korea is tightening its regulations on cryptocurrency transfers below 1 million won.
The new rules will expand the country's travel rule, requiring exchanges to track sender and recipient details for all virtual asset transfers.
Authorities are concerned with the rise of "smurfing," where large amounts are divided into smaller transactions to evade reporting thresholds.
New measures may include freezing accounts suspected of criminal activity and extending AML obligations to more professionals.
South Korea is also part of international efforts like the OECD’s Crypto-Asset Reporting Framework for better data sharing on crypto transactions.

South Korea to Tighten Crypto Tracking on Transfers Below 1 Million Won — New Regulations Coming Soon

South Korea’s Enhanced Oversight on Small Crypto Transfers

South Korea is making moves to tighten its control over cryptocurrency transactions that are under 1 million won. This decision comes in response to concerns that such transfers have been used increasingly to move illicit funds without triggering necessary identity checks.

This initiative will broaden the country’s travel rule, which currently mainly applies to larger transactions. The plan is currently under review by financial regulators who have formed a task force led by the Korea Financial Intelligence Unit (FIU). This task force aims to revise the Act on Reporting and Using Specified Financial Transaction Information, known as the Special Act.

Focus on Small Transactions Amid Rising Smurfing Tactics

Recent reports indicate that officials are exploring whether to mandate exchanges to collect and share information about the sender and recipient for all virtual asset transactions, even those valued at 1 million won or less. The travel rule necessitates exchanges to confirm and document details such as names and wallet addresses during both deposits and withdrawals.

Regulators have noticed a surge in “smurfing,” a tactic where large amounts of money are divided into numerous smaller transfers to bypass reporting requirements. While larger transactions have traditionally been monitored closely, authorities suspect that criminals are shifting their activities toward low-value transfers to evade current regulations.

Financial officials have linked these methods to tax evasion, substance trafficking, and the movement of illegal funds out of the country. On November 29, the inaugural meeting of the FIU task force was held under the leadership of Director Lee Hyeong-ju to outline their comprehensive reform strategy.

Measures to Prevent Evasive Transactions

The discussions within the task force include adding more stringent measures to prohibit funds from disappearing before investigations can start. One proposal is to implement an account suspension system that grants authorities the ability to temporarily freeze accounts linked to serious criminal activity.

Additionally, the proposed changes would extend anti-money laundering (AML) responsibilities to other professionals, such as lawyers and accountants, who may be involved in complex financial dealings.

This focus on small transactions is part of a broader wave of increased regulation within the cryptocurrency space. The Financial Supervisory Service has advised local exchanges to set up continuous monitoring systems to detect unusual trading activity and report such incidents to regulators.

A Comprehensive Regulatory Framework

Simultaneously, South Korea has restricted access to international transactions deemed high-risk, leading significant app stores to remove unregistered foreign applications targeting the Korean market. Furthermore, exchanges are undergoing less scrutiny regarding their financial stability and ownership structures.

The new regulations aim to prevent individuals with prior convictions related to tax or drug offenses from becoming major stakeholders in licensed crypto firms. By the second half of 2025, businesses engaged in cross-border cryptocurrency transactions will be required to pre-register and submit regular updates to the Bank of Korea.

These domestic initiatives are part of South Korea’s broader involvement in international data-sharing efforts. The country has joined the OECD’s Crypto-Asset Reporting Framework, allowing tax authorities to exchange standardized information regarding crypto transactions globally.

Transaction data collection is anticipated to commence next year, with complete information sharing expected to roll out by 2027.