Expanded Travel Rule and Anti-Money Laundering Measures
South Korea plans to extend its crypto Travel Rule to transactions below $680, closing a loophole that allowed users to split transfers into smaller amounts to dodge reporting requirements. Financial Services Commission chairman Lee Eok-won announced the measure to the National Assembly's Legislation and Judiciary Committee on Wednesday.
The expansion means exchanges must collect and share sender and receiver information for crypto transfers under 1 million won. Lee stated the government will crack down on money laundering activities exploiting crypto transactions, particularly those involving drug trafficking, tax evasion, and overseas payment schemes.
Targeting High-Risk Offshore Exchanges and VASP Oversight
New restrictions will target high-risk offshore exchanges that pose heightened money laundering risks. These platforms will be blocked from interacting with South Korean users. Exchanges will face more stringent reviews of their financial health, widening the criteria for Virtual Asset Service Provider registration.
The government will prohibit individuals with criminal records involving drugs or tax crimes from becoming major shareholders of VASPs. This aims to prevent malicious actors from holding influential positions at licensed firms. The Financial Intelligence Unit will introduce pre-emptive account freezing mechanisms for serious offenses to stop funds from disappearing during investigations.
Timeline and Regulatory Evolution
Officials plan to finalize the new framework in the first half of 2026 and submit legislative amendments to the National Assembly. The changes represent the country's most comprehensive move to tighten AML regulations since the Special Financial Information Act was updated in 2021, while expanding collaboration with global bodies such as the Financial Action Task Force.
Previous Efforts Against Tax Evasion
The announcement follows earlier efforts to combat tax evasion in South Korea. On October 19, a National Tax Service official said the agency was prepared to conduct home searches and confiscate cold wallets and hard drives if owners were suspected of hiding their crypto assets offline to avoid paying taxes.
The NTS said it would analyze tax delinquent histories using crypto-tracking programs. If individuals are suspected of offline concealment, they will be subject to searches and seizures. The agency stated it would use advanced monitoring tools to track down cryptocurrency holdings that taxpayers attempt to hide from authorities.