South Korea is tightening its grip on the crypto industry with new anti-money laundering reforms aimed at preventing abuse and criminal infiltration.
Key Takeaways
- Travel rule expanded to all crypto transactions, including those under 1 million won (approximately $680), closing a key regulatory loophole
- High-risk offshore exchanges to be banned from operating in South Korea due to money laundering concerns
- Individuals with serious criminal records will be barred from becoming major shareholders in licensed crypto firms
- New rules will mandate stricter KYC and financial reviews for all Virtual Asset Service Providers (VASPs)
What Happened?
South Korea’s Financial Services Commission (FSC) has announced a sweeping expansion of its cryptocurrency regulations. The most notable change is an update to the “travel rule,” which will now apply to all transactions, regardless of size. This initiative is part of a broader effort to root out illicit activity in the virtual asset sector.
LATEST: 🇰🇷 South Korea is extending its crypto Travel Rule to include transactions under 1 million won, roughly $680, closing a loophole where users could split transfers into smaller amounts to avoid reporting requirements. pic.twitter.com/KniiPz3BMa
— CoinMarketCap (@CoinMarketCap) November 28, 2025
New Travel Rule Targets Small Transfers
FSC Chairman Lee Eok-won unveiled the reforms during the Financial Intelligence Unit’s (FIU) 19th Anti-Money Laundering Day ceremony on November 28. The updated travel rule will now cover crypto transactions under the previous 1 million won threshold. Authorities hope this move will prevent bad actors from evading oversight by breaking large sums into smaller, untraceable pieces.
Under the revised regulation:
- Crypto exchanges must collect and share sender and recipient details for all transfers, even those under $680.
- Real-name systems and identity verification will be required for every transaction.
- These changes align with Financial Action Task Force (FATF) global anti-money laundering standards.
Chairman Lee confirmed:
Blocking Risky Platforms and Criminal Shareholders
Another major feature of the reform package is a complete ban on crypto exchanges that are not licensed in South Korea and are deemed high-risk by regulators. These foreign platforms often operate outside of the country’s legal oversight and are known to facilitate unverified or suspicious trades.
New compliance rules include:
- Blocking foreign exchanges that pose elevated risks of money laundering or fraud.
- Forcing all exchanges to undergo more rigorous financial and compliance checks.
- Requiring verification of financial reserves, internal controls, and compliance systems.
Additionally, individuals with serious criminal records, such as convictions for drug offenses or tax evasion, will be banned from becoming major shareholders in virtual asset firms. These measures aim to keep crypto businesses free from criminal control or influence.
Preemptive Account Freeze and Professional Involvement
To prevent the transfer of illicit funds during investigations, the FIU will implement a preemptive account freeze system, allowing authorities to instantly suspend accounts tied to criminal proceeds. This system will focus on serious crimes like narcotics trafficking and illegal gambling.
The reform also involves:
- Engaging professionals such as lawyers, accountants, and tax specialists to build stronger anti-money laundering infrastructure.
- Expanding the review process for VASP registration to assess applicants’ financial soundness and social credibility.
The FSC said it would finalize the details of the proposal in the first half of next year and plans to submit the changes to the National Assembly as amendments to the Specific Financial Information Act.
CoinLaw’s Takeaway
In my experience covering global crypto regulation, this is one of the most aggressive AML crackdowns we’ve seen from any government recently. South Korea is not just closing gaps, it’s building a whole new firewall around its crypto industry. I found the expansion of the travel rule to even tiny transactions especially significant. It shows that regulators are serious about shutting down every possible channel for illicit activity. If you’re operating or investing in the Korean crypto space, these new rules are going to reshape compliance, security, and even business models. It’s a wake-up call for the rest of Asia and beyond.
