- South Korea is moving away from mandatory reporting of crypto transfers above 10M won.
- The proposed rule could have increased annual suspicious transaction reports by 85 times.
- Authorities will still expand the travel rule, requiring identity information for all transfers.
South Korean financial authorities have backed away from a controversial proposal that would have forced crypto exchanges to automatically report transfers above 10 million won ($7,300) involving overseas crypto platforms or personal wallets.
Under the original proposal, any transfer above the threshold would have been treated as a suspicious transaction and reported to the Financial Intelligence Unit (FIU), regardless of whether the exchange identified actual signs of wrongdoing.
Following consultations with the industry, regulators have now decided to let exchanges assess anti-money laundering (AML) risks themselves rather than requiring blanket reporting based solely on transaction size.
An FIU official said companies should make qualitative judgments about risk instead of mechanically reporting transactions simply because they exceed a fixed amount.
Industry Pushback Changed the Debate
The proposal triggered strong opposition from South Korea’s crypto industry. The Digital Asset Exchange Alliance (DAXA), which represents the country’s five largest exchanges, argued that suspicious transaction reports should remain tied to genuine risk assessments rather than transaction thresholds.
According to industry estimates, the rule could have increased annual suspicious transaction reports from 63,408 to more than 5.44 million filings.
Exchanges warned that an 85-fold increase would overwhelm compliance teams and flood regulators with routine reports, making it harder to identify genuinely suspicious activity.
DAXA also argued that the proposal effectively transferred responsibility for regulatory reporting from authorities to exchanges by forcing firms to submit reports regardless of actual risk.
Travel Rule Expansion Remains
While authorities appear ready to abandon mandatory threshold-based reporting, several other regulatory changes remain intact. The government is still moving forward with plans to remove the current 1 million won threshold for travel rule requirements.
Under existing rules, exchanges only need to collect and share sender and receiver information for transfers above 1 million won. The amendment would extend those obligations to all transfers, including transactions below the current threshold.
For users, this means more identity verification requirements on cross-border crypto transfers, regardless of transaction size.
Related: South Korea’s DAXA Forces Crypto Exchanges to Invalidate Suspicious API Keys
Other Compliance Rules Softened
Authorities also relaxed several other provisions after receiving feedback from the industry. Enhanced customer verification was originally set to become mandatory for all high-risk suspicious transactions.
Regulators now plan to require those checks only when an exchange determines that a transaction presents particularly elevated risks. A proposed requirement forcing virtual asset businesses to maintain debt ratios below 200% has also been delayed by one year to give smaller operators more time to comply.
In addition, regulators softened rules requiring anti-money laundering infrastructure to be located entirely inside South Korea. Exchanges will now be allowed to use overseas cloud services, except when handling unique identification data or personal credit information.
Final Rules Still Being Reviewed
The Financial Services Commission recently clarified that no final decision has yet been published regarding the 10 million won reporting provision.
The FIU is still reviewing alternative approaches before the amendment becomes final. While the direction of travel appears clear, regulators have left room for a revised version of the reporting framework to emerge before implementation.
If the revised amendment clears reviews by the Ministry of Government Legislation and other agencies, the updated rules are expected to take effect on August 20.
Related: South Korea Advances Plans to Tax Crypto Staking and Lending at 22%
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