South Korea Eliminates Crypto Transfer Threshold to Prevent Compliance Circumvention

South Korea Eliminates Crypto Transfer Threshold

South Korea’s Cabinet has approved amendments that fundamentally reshape the country’s cryptocurrency Travel Rule requirements. The changes eliminate the current 1 million won threshold, which previously applied reporting obligations only to transfers exceeding that amount. Under the new framework, all transfers between registered cryptocurrency service providers will trigger the same information-sharing and verification requirements, regardless of transaction value.

The Travel Rule itself functions as a transparency mechanism, requiring platforms to exchange sender and recipient information when processing transfers. Under South Korea’s previous system, only transfers above the million won barrier activated these requirements, creating a gap that savvy users learned to exploit. The recent amendments close this gap by making every transfer subject to the same compliance obligations.

Documented Cases Drive Regulatory Action

South Korea’s Financial Intelligence Unit supported the threshold removal by presenting concrete evidence of how users systematized the loophole. In one notable case, an individual deposited roughly 200 million won at a cryptocurrency exchange and purchased USDT stablecoin. Rather than withdrawing the full amount, the user then initiated 216 separate withdrawal transactions, each sized below the 1 million won threshold. This deliberate fragmentation allowed the user to avoid triggering the reporting requirements that would have applied to a single, larger transfer.

This documented pattern convinced regulators that maintaining any fixed monetary threshold was untenable. Users could simply divide their transfers mathematically to stay beneath whatever line regulators drew. The only effective solution was to apply the Travel Rule universally to all transactions, eliminating the possibility of circumvention through transaction splitting.

Beyond expanding the Travel Rule, South Korea is introducing comprehensive Anti-Money Laundering requirements for transfers involving foreign cryptocurrency exchanges and personal wallets. Service providers must now evaluate the risk level associated with each counterparty and establish their own approval criteria. Transfers directed to foreign exchanges classified as low-risk will generally be allowed. Transfers to high-risk counterparties face restrictions or prohibition. Personal wallet transfers are permitted when the sender and recipient are the same individual, except when the wallet is flagged as high-risk.

Transactions valued at 10 million won or greater involving overseas platforms or personal wallets will require active monitoring by the service provider to identify potential suspicious activity.

Phased Implementation Timeline

The amendments also establish stricter registration criteria for all cryptocurrency service providers. These new standards address financial stability, internal controls, staffing qualifications, and technical infrastructure. Regulators have also expanded their review authority to include major shareholders of service providers.

VASP registration requirements under the new rules become effective August 20, 2026. However, service providers already operating in South Korea receive a twelve-month grace period to achieve full compliance with the financial, staffing, infrastructure, and internal control standards.

The expanded Travel Rule and related AML transfer requirements will take effect six months after the decree is officially promulgated. South Korean authorities stated that suspected money laundering through overseas exchanges and personal wallets has risen, with bad actors exploiting gaps in the prior regulatory framework.

Stronger compliance frameworks typically increase operational costs for platforms but enhance market integrity by reducing illicit activity.

Source: South Korea, via Cointelegraph. Not financial advice.