South Korea is expanding its cryptocurrency Travel Rule to encompass all transfers between registered virtual asset service providers (VASPs) by removing the current 1 million won (approximately $700) threshold.

The nation's Cabinet approved amendments to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information during a session on Tuesday, paving the way for the stricter regulations.

Expanded Travel Rule and Information Sharing

Under the forthcoming changes, the Travel Rule will be applied to all transfers between registered crypto service providers, regardless of their monetary value. This new mandate also requires receiving platforms to obtain information on both the sender and the recipient. In cases where the required data is unavailable, platforms may either request the missing information or reject the transaction.

The Financial Intelligence Unit explained that eliminating the threshold is intended to prevent users from circumventing the rule by dividing large transfers into smaller amounts. The agency cited a specific case in which a user deposited roughly 200 million won into a cryptocurrency exchange, purchased Tether (USDT), and then executed 216 separate withdrawals, each valued below the 1 million won limit.

New Anti-Money Laundering Requirements

The amendments also introduce new Anti-Money Laundering (AML) obligations specifically for transfers that involve overseas crypto exchanges and personal wallets.

Registered local VASPs will now be required to assess the risk posed by each counterparty and determine which transfers they will permit based on that evaluation. While transfers to overseas exchanges deemed low-risk will be allowed, transactions with other foreign exchanges and personal wallets will generally be permitted only when the sender and recipient are the same individual. However, transactions involving any counterparties classified as high-risk will be prohibited.

Furthermore, crypto platforms must establish their own systems for monitoring suspicious transactions, particularly for transfers valued at 10 million won or more that involve foreign exchanges or personal wallets. South Korean authorities noted that suspected money laundering activities using overseas exchanges and personal wallets have increased as bad actors have exploited gaps in the existing AML rules governing such transfers.

Stricter Provider Registration and Timeline

The decree also strengthens the registration requirements for crypto service providers. The updated standards cover financial health, internal controls, staffing, and infrastructure, while also expanding the scrutiny applied to major shareholders.

The new VASP registration provisions are set to take effect on August 20. Existing providers will be given an additional year to comply with some of the new requirements related to financials, staffing, infrastructure, and internal controls. The expanded Travel Rule and other transfer-related AML requirements will be implemented six months after the decree is officially promulgated.