USDSouth Korea Lowers Crypto Travel Rule to Sub-1M Won Transfers as AML Scrutiny Tightens
Regulators Move to Close Small-Transfer Loopholes, Freeze Suspect Accounts Faster
TL;DR
- FSC expands crypto Travel Rule to apply to transfers under 1M won (~$680-700) to prevent users from bypassing AML checks through small splits.
- VASPs face tougher reserve/compliance reviews, while FIU gains power to freeze accounts pre-emptively.
- Rules expected to be formalized in 1H26, signaling one of the country’s strongest pushes yet against illicit cross-border crypto flows.
South Korean regulators escalated their anti-money-laundering stance on November 28, 2025, unveiling plans to impose the Travel Rule on crypto transfers below 1 million won — roughly a $680-700 threshold previously considered exempt from mandatory identity checks. Authorities flagged long-running abuse of this blind spot, stating that users have been able to break down large transfers into small-value increments to dodge verification requirements and quietly move funds across borders. Officials framing the change described it as a direct strike on structured remittance patterns that helped tax-evaders and criminal networks exploit digital asset rails while remaining under reporting thresholds.
Regulatory updates outline mandatory sender-receiver data collection for all sub-threshold transactions, forcing virtual asset service providers to build systems capable of identifying participants on even the smallest transfers. The Financial Services Commission has linked the policy shift to a broader reinforcement of exchange oversight, confirming that entities will undergo stricter financial reserve inspections and internal security assessments before licensing, with individuals convicted of crimes such as drug offenses or tax fraud banned from holding meaningful ownership stakes in licensed platforms. These amendments reflect what officials cast as a need to protect market integrity rather than stifle innovation, but the compliance cost air-pocket for smaller businesses is becoming harder to ignore, with technology, reporting, and staffing overhead expected to rise.
The reach of the crackdown extends beyond domestic compliance, as South Korea signals readiness to blacklist foreign platforms deemed high-risk and restrict local access entirely, reflecting concerns about overseas remittance paths being used to bypass scrutiny. The Financial Intelligence Unit has been cleared to freeze suspicious accounts pre-emptively when AML red flags emerge, removing the need to wait until funds exit the ecosystem. Public briefings cited rising misuse as momentum for the new framework: the FIU flagged more than 36,000 suspicious crypto transactions between January and August 2025 alone, surpassing totals recorded in both 2023 and 2024 combined. Across 2021 through August 2025, illicit crypto-linked forex crime volumes tied to underground “hwanchigi” circuits reportedly reached 9.56 trillion won — about $7.1 billion.
Timelines point toward legislative submission in the first half of 2026, placing implementation behind a formal approval cycle but marking one of the country's most aggressive structural overhauls of digital-asset compliance controls. Policymakers expect the expanded Travel Rule to eliminate the anonymity of low-value transfers and remove an evasion technique that has persisted despite previous AML reforms. The industry now faces a future where seamless micro-transactions — once considered too small to matter — are monitored, logged, and linked to identity. South Korea’s digital economy enters a new phase where even tiny transfers carry regulatory weight, reshaping the balance between user freedom, exchange operation, and state oversight as crypto finance blends deeper into formal financial governance.
This article has been refined and enhanced by ChatGPT.
