South Korea to Enhance Crypto Regulations: Tightening Oversight on Transfers Under 1 Million Won
South Korea is preparing to strengthen its oversight of cryptocurrency transfers below 1 million won, aiming to close a loophole that regulators believe is increasingly being exploited to transfer illicit funds without triggering identity checks. This move is part of a broader effort to expand the country’s so-called travel rule, which currently applies primarily to larger transactions.
The plan, under review by financial authorities, follows the launch of a task force led by the Korea Financial Intelligence Unit (FIU) to revise the Law on Reporting and Use of Certain Financial Transaction Information, often referred to as the “Special Law.” The task force is considering whether to require exchanges to collect and share sender and recipient information for all virtual asset transfers, including those valued at 1 million won or less.
Regulators Turn Attention to Small Crypto Payments as Smurfing Grows
According to local media reports, the increasing use of “smurfing,” a method in which large amounts are divided into many small transfers to avoid reporting thresholds, has prompted authorities to act. While transfers of larger amounts have long been monitored, authorities believe criminals have shifted their activities to transactions of smaller amounts to circumvent existing controls. Tax authorities have linked these patterns to tax evasion, drug trafficking, and the movement of illicit funds abroad.
The Travel Rule, sometimes referred to as the real name system for crypto, requires exchanges to verify and record user data such as names and wallet addresses during deposits and withdrawals. The focus of the debate is on tightening control over virtual asset providers, harmonizing national regulations with the international principles of the Financial Action Task Force, and improving inspection and sanction mechanisms.
South Korea Moves to Freeze Suspicious Crypto Accounts
Beyond expanding travel rules, the task force is considering other measures to prevent funds from disappearing before investigations can begin. This includes introducing an account suspension system that would allow authorities to temporarily block accounts suspected of being linked to serious crimes. The proposed changes would also extend anti-money laundering obligations to certain professional groups, such as lawyers and accountants, who may be involved in complex financial transactions.
The crackdown on small transfers is part of a broader tightening of crypto regulation already underway. Local exchanges have been ordered by the Financial Conduct Service to set up around-the-clock monitoring systems to detect unusual trades and report suspicious activity to regulators. South Korea has taken similar action, restricting access to international transactions deemed high-risk and forcing major app stores to delete unregistered foreign apps serving the Korean market.
Starting in the second half of 2025, companies involved in cross-border crypto transactions will also be required to pre-register and submit regular reports to the Bank of Korea. These domestic moves come in parallel with South Korea’s participation in international data-sharing efforts. The country has joined the OECD’s Crypto-Asset Reporting Framework, which will allow tax authorities to share standardized information on crypto transactions across borders.
Transaction data collection is expected to begin next year, with full information sharing planned for 2027. For more information on South Korea’s crypto regulations and the travel rule, visit https://cryptonews.com/news/south-korea-crypto-travel-rule-under-1m/.
