South Korea to require identity checks for crypto transfers under 1 million won ($680)

The Korean government is tightening its laundering controls in the crypto sector by expanding the Travel Rule. Under the updated framework, cryptocurrency exchanges and virtual asset service providers must verify the identities of anyone sending or receiving transfers of less than 1 million won (approximately $680).

Financial Services Commission (FSC) Chairman Lee Eun-woon announced the development at the “Anti-Money Laundering Day” event. Under the new directive from the FSC, the so-called “travel rule” (or “crypto real-name system”) will cover all cryptocurrency transactions — including low-value transfers that previously escaped mandatory identity verification.

The regulators claim that for years, cryptocurrency users have been exploiting a significant loophole that them to make smaller blockchain transactions. The users were well-positioned to split up larger transfers in a way that not trigger the systems requirement for users to verify their identities.

South Korea is now moving to close that gap with new rules that prevent exchanges from treating transfers of less than 1 million won as anonymous. All transactions, regardless of size, must be traceable, and exchanges will be required to collect and share detailed information about the sender and recipient. The aim is to curb “smurfing,” a tactic that enables illicit funds to slip through the system with minimal oversight.

According to the FSC, the expanded rules are aimed at combating illicit activity using cryptocurrencies, including money laundering, tax evasion, drug trafficking, and overseas payment schemes

The government is cracking down on companies operating within its borders, which analysts say will have a positive outcome. New players seeking to register as a virtual asset service provider — effectively, legitimate cryptocurrency exchanges — will be subject to stricter financial health checks, focusing on liquidity, capital adequacy, and the safe handling of client funds.

Regulators say that only genuinely fit and proper firms should be entrusted with managing customer assets.

While the announcement marks a strong regulatory intent, the full framework is not yet in force. According to the FSC, they intend to finalize the revised regulations in the first half of 2026, with legislative changes to be brought before the National Assembly.

Tax authorities now have advanced analytical tools capable of decoding blockchain activity, and they appear to be actively tracking—and cracking down on—wealth holders who attempt to hide their assets.