South Korea is tightening its grip on illicit crypto activity with a sweeping expansion of the Travel Rule, announced by the Financial Services Commission (FSC) on November 28, 2025.
The new framework will apply to all virtual asset transfers, even those under 1 million KRW (≈ $680), closing a loophole that criminals have used to avoid detection through small, fragmented transfers.
Under the updated rules, every crypto exchange operating in South Korea must collect and share identifying information for both senders and recipients, regardless of transaction size. This eliminates a long-standing vulnerability: bad actors often split large amounts into dozens of smaller transfers to avoid triggering reporting thresholds. Regulators say those tactics will no longer work once full-coverage monitoring is in place.
The FSC also plans to ban South Korean users from trading on unregistered or "high-risk" offshore exchanges, many of which have weak compliance standards or no presence in the country. Authorities argue that these platforms are frequently used for laundering illicit funds or bypassing domestic oversight.
The reform package includes a tougher registration process for Virtual Asset Service Providers (VASPs). Financial stability reviews will be expanded, and companies with poor internal controls or unclear governance could face rejection or suspension.
To protect the integrity of the sector, individuals with criminal histories tied to drug crimes, financial misconduct, or tax evasion will be barred from serving as major shareholders of licensed crypto companies.
The Financial Intelligence Unit (FIU) will receive new authority to freeze accounts early in an investigation when serious crimes are suspected. Regulators say this will prevent funds from being quickly moved or hidden, a common problem in fast-paced digital markets.
The government plans to finalize the new anti-money laundering framework in the first half of 2026, followed by a National Assembly review for full legislative approval.
The expanded Travel Rule marks one of South Korea's most aggressive efforts yet to secure its fast-growing crypto sector, signaling a future where all digital asset activity is subject to the same scrutiny as traditional finance.