South Korea is preparing to tighten oversight of cryptocurrency transfers below 1 million won, closing a gap that regulators say has increasingly been used to move illicit funds without triggering identity checks.
The move would expand the country’s so-called travel rule, which currently applies mainly to larger transactions.
The plan is being reviewed by financial authorities following the launch of a task force led by the Korea Financial Intelligence Unit (FIU) to revise the Act on Reporting and Using Specified Financial Transaction Information, often referred to as the Special Act.
Regulators Turn Attention to Small Crypto Payments as Smurfing Grows
According to local media reports, officials are examining whether to require exchanges to collect and share sender and recipient information for all virtual asset transfers, including those worth 1 million won or less.
The travel rule, sometimes described as a real-name system for crypto, obliges exchanges to verify and record user details such as names and wallet addresses during deposits and withdrawals.
Authorities have pointed to the growing use of “smurfing,” a method in which large sums are broken into many small transfers to avoid reporting thresholds.
While higher-value transfers have long been monitored, officials believe criminals have shifted activity toward low-value transactions to bypass existing controls.
Financial authorities have linked these patterns to tax evasion, drug trafficking, and the movement of illegal funds overseas.
On November 29, the first meeting of the FIU task force, which is headed by the Director Lee Hyeong-ju, was held to chart its broader reforms.
The focus of the debate is on tightening control over the virtual asset service providers, harmonizing the domestic regulations with the international principles of the Financial Action Task Force, and enhancing the inspection and sanctioning mechanisms.
Authorities as well have admitted that the anti-money laundering regime, which was instituted over 20 years ago in South Korea, has not been keeping up with cross-border digital crime and the booming virtual resources.
South Korea Moves to Freeze Suspicious Crypto Accounts
Beyond the travel rule expansion, the task force is considering additional measures aimed at preventing funds from disappearing before investigations can begin.
This includes introducing an account suspension system that would allow authorities to temporarily freeze accounts suspected of being tied to serious crimes.
The proposed revisions would also extend anti-money laundering obligations to certain professionals, such as lawyers and accountants, who may be involved in complex financial transactions.
The crackdown on small transfers is a part of a broader increase in crypto regulation that is already happening.
Local exchanges have been advised by the Financial Supervisory Service to establish round-the-clock monitoring systems to identify abnormal trading and report the suspicious activity to the regulators.
South Korea has acted similarly and restricted access to international transactions considered to be high risk, forcing major application stores to delete unregistered foreign apps that cater to the Korean market.
Simultaneously, exchanges are under less examination of their financial wellness and proprietorship forms.
Proposed rules would bar individuals with past convictions for tax or drug-related crimes from becoming major shareholders in licensed crypto firms.
From the second half of 2025, businesses involved in cross-border crypto transactions will also be required to preregister and submit regular reports to the Bank of Korea.
These domestic steps are unfolding alongside South Korea’s participation in international data-sharing efforts.
The country has joined the OECD’s Crypto-Asset Reporting Framework, which will enable tax authorities to exchange standardized information on crypto transactions across borders.
Transaction records are expected to begin being collected next year, with full information sharing scheduled to start in 2027.
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