Travel rule to cover all transactions

Entry screening for virtual asset firms also tightened

The Financial Services Commission office at Government Complex Seoul in Jongno-gu, Seoul [Yonhap]
The Financial Services Commission office at Government Complex Seoul in Jongno-gu, Seoul [Yonhap]

South Korea will extend its travel rule — which requires virtual asset service providers to share sender and recipient information when transferring virtual assets to another exchange — to transactions below 1 million won ($707), closing a loophole that allowed users to evade oversight by splitting transfers. Financial requirements for virtual asset service providers will also be tightened, with scrutiny extended to major shareholders and stricter debt-ratio limits introduced.

The Financial Services Commission's Korea Financial Intelligence Unit (KoFIU) said Tuesday that a cabinet meeting approved an amendment to the enforcement decree of the Act on Reporting and Using Specified Financial Transaction Information.

Under the amendment, the current 1 million won threshold for applying the travel rule to virtual asset transfers will be eliminated entirely. The change targets the practice of breaking up transfers into smaller amounts to stay below the limit and avoid regulation. Receiving virtual asset service providers will be required to request missing sender or recipient information or reject the transaction outright.

Oversight of transactions with overseas exchanges and personal wallets will also be strengthened. Transfers to low-risk overseas exchanges will remain permitted, but transfers to other overseas exchanges or personal wallets will only be allowed when the sender and recipient are the same person. Transactions with high-risk overseas exchanges will be banned altogether. Providers handling transactions of 10 million won or more will be required to maintain a separate suspicious transaction management system.

Screening standards for virtual asset service provider registration will be tightened as well. Shareholders who have appointed more than half of a company's directors or chief executive will be subject to major shareholder review. When the largest shareholder is a corporation, that corporation's own largest shareholder and representative will also undergo screening.

Virtual asset service providers will be required to keep their debt ratio at or below 200 percent and must have no record of default or other credit violations over the preceding three years. They will also need to maintain qualified personnel, IT and security infrastructure, and internal control systems. Existing operators will be given a one-year grace period to comply with some of the tightened requirements.

The strengthened registration screening rules take effect Aug. 20. The expanded travel rule and new regulations on overseas exchange and personal wallet transactions will apply six months after the amended decree is promulgated.


rim@heraldcorp.com