The Cabinet approved amendments to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information on Tuesday, August 11. The expanded Travel Rule will take effect on February 20, 2027, giving virtual asset service providers six months to prepare their compliance systems.
The move closes an exemption that applied to transfers below 1 million won, roughly $700 at current exchange rates. Once the amended rule takes effect, transfers between registered domestic virtual asset service providers, or VASPs, will be covered regardless of their monetary value.
South Korean authorities have argued that transaction thresholds can be exploited by criminals who divide large transfers into numerous smaller payments. The practice, commonly described as smurfing or structuring, makes individual transactions appear less significant while allowing substantial sums to move across platforms.
One case examined by regulators involved a customer who deposited about 200 million won into a cryptocurrency exchange, purchased the stablecoin Tether and then divided the assets into 216 withdrawals. Each withdrawal was kept below the existing 1 million won threshold.
Transfers worth less than 1 million won account for about 60% of domestic virtual asset transfers, highlighting the scale of activity previously outside the full information-sharing requirement.
Under the strengthened framework, a receiving VASP must obtain information identifying the originator and beneficiary. If required information is unavailable, the recipient platform must seek it from the sending business and can reject the transfer when the information cannot be secured.
The Travel Rule is designed to create a traceable record when digital assets move between regulated businesses. It applies anti-money laundering principles already used for conventional financial transfers to cryptocurrency transactions, where blockchain addresses can otherwise obscure the identity of the people controlling them.
South Korea introduced its existing cryptocurrency Travel Rule in March 2022, applying it to transfers of at least 1 million won. The latest revision moves the country beyond a threshold-based model towards comprehensive coverage of transfers between domestic regulated providers.
Rules governing transfers involving overseas exchanges and personally controlled wallets are also being tightened. Domestic VASPs will be required to evaluate the money-laundering risk associated with such transactions and impose restrictions where the counterparty presents an elevated risk.
Transactions with overseas businesses or personal wallets assessed as posing particularly high risks can be prohibited. Larger transactions involving such destinations will receive heightened scrutiny, with transfers of at least 10 million won falling under enhanced monitoring and reporting requirements where applicable.
The measures form part of a wider overhaul of South Korea’s anti-money laundering regime. Registration standards for virtual asset companies are being strengthened alongside the transfer rules, including broader scrutiny of major shareholders, management and financial soundness.
VASPs will be expected to maintain adequate organisational structures, personnel, computer systems and internal controls. Financial requirements introduced through the revised framework include a debt ratio generally capped at 200%, alongside checks intended to prevent operators with serious financial or compliance deficiencies from entering the market.
Some of those tighter registration provisions are scheduled to take effect from August 20, while exchanges have a longer preparation period for the zero-threshold Travel Rule.
Seoul is simultaneously pressing for stronger international standards. The Korea Financial Intelligence Unit has urged the Financial Action Task Force to widen Travel Rule requirements for small-value cryptocurrency transfers, arguing that criminals can exploit differences between national thresholds and move funds through fragmented transactions.
FATF standards require jurisdictions to regulate VASPs for anti-money laundering and counter-terrorist financing purposes and provide a framework for transmitting information about parties to virtual asset transfers. Implementation remains uneven across jurisdictions, creating compliance gaps when assets cross borders.
The FATF said in its 2026 assessment of virtual asset regulation that significant gaps persisted globally and called on countries to apply anti-money laundering and counter-terrorist financing rules to virtual asset businesses without further delay.
South Korea’s push effectively tests whether eliminating monetary exemptions can become a broader international approach. A global shift would increase compliance costs for exchanges because even very small transfers would generate identification and information-sharing obligations.
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