South Korea tightens digital asset regulations and travel rule

South Korean financial authorities are tightening regulations for digital asset service providers (VASPs) to prevent money laundering and enhance oversight. The Financial Intelligence Unit (FIU) announced that an amendment to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information has been approved.

A key change involves the expansion of the ‘travel rule,’ which requires the provision of sender and receiver information during virtual asset transfers. The previous 1 million won threshold for this rule will be abolished, meaning all transactions must now include this information to prevent users from bypassing regulations by splitting large sums into smaller transfers.

Furthermore, the screening process for major shareholders of digital asset businesses will be significantly strengthened. The scope of the audit will now include ‘actual controlling shareholders,’ such as those who appoint a majority of directors or representatives. For corporate major shareholders, the ultimate controlling shareholders and representatives of those corporations will also undergo scrutiny. Requirements include maintaining a debt-to-equity ratio below 200% and meeting strict social credit and financial stability standards.

Regulations regarding transactions with overseas exchanges and private wallets will also be adjusted based on risk levels. Transactions with high-risk overseas exchanges will be prohibited, while transactions with other overseas entities or private wallets will only be permitted if the sender and receiver are the same person. These new shareholder screening rules take effect on the 20th, while travel rule expansions and overseas transaction management will apply six months after the decree is promulgated.