South Korea will extend the Travel Rule to all transfers between registered Virtual Asset Service Providers (VASPs), eliminating the 1 million won (approximately $700) threshold.
The country's Cabinet approved amendments to the Enforcement Decree of the Act on the Reporting and Use of Certain Financial Transaction Information on Tuesday.
Following the changes, the Travel Rule will apply to all transfers between registered crypto service providers regardless of the amount. Receiving platforms will be required to obtain information about the sender and recipient. They will be able to request missing details or reject transactions in the absence of necessary data.
The elimination of the threshold is intended to prevent users from circumventing the rule by splitting transfers into smaller amounts, the Financial Intelligence Unit reported.
The agency cited a case where a user purchased Tether USDt (USDT) by depositing about 200 million won to a cryptocurrency exchange and then made 216 withdrawals, each less than 1 million won.
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South Korea Tightens Rules for Overseas Exchanges and Personal Wallets
The amendments introduce new anti-money laundering (AML) requirements for transfers involving overseas cryptocurrency exchanges and personal wallets.
Registered local VASPs will be required to assess counterparty risks and decide which transfers to permit. Transfers to low-risk overseas exchanges will be allowed. Transactions with other foreign exchanges and personal wallets will generally be permitted only if the sender and recipient are the same person.
Transactions with counterparts deemed high-risk will be prohibited.
Crypto platforms will also be required to establish their own suspicious transaction monitoring systems for transfers of 10 million won or more involving foreign exchanges or personal wallets.
South Korean authorities stated that the number of suspected money laundering cases involving overseas exchanges and personal wallets has increased, with loopholes in the current AML rules for such transfers being exploited.
The Decree also tightens registration requirements for crypto service providers, including standards for financial soundness, internal controls, staffing, and infrastructure, and expands the vetting of major shareholders.
The VASP registration requirements will take effect on August 20. Existing providers will be given an additional year to meet some of the requirements related to finances, personnel, infrastructure, and internal controls. The expanded Travel Rule and other AML requirements related to transfers will take effect six months after the Decree's publication.
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