South Korea Moves to Close Crypto Reporting Loophole for Small Transfers

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South Korea is set to expand its cryptocurrency monitoring to include transfers below 1 million won, targeting a regulatory gap exploited for moving illicit funds. This move would broaden the application of the country’s travel rule, which currently focuses on larger transactions.

The plan is under review by financial authorities following the formation of a task force led by the Korea Financial Intelligence Unit (FIU). The group is revising the Act on Reporting and Using Specified Financial Transaction Information, commonly called the Special Act.

Reports indicate officials are considering a mandate for exchanges to collect and share sender and recipient data for all virtual asset transfers, including those valued at 1 million won or less. The travel rule functions as a real-name system, requiring exchanges to verify and record user details.

Authorities cite the increased use of “smurfing” as a key reason for the change. This method involves splitting large sums into numerous small transfers to evade existing reporting thresholds and identity checks.