South Korea's Financial Intelligence Unit (FIU) under the Financial Services Commission met with digital asset exchange representatives on the 4th to announce a regulatory direction change regarding overseas cryptocurrency transfers. Instead of imposing mandatory suspicious transaction reporting (STR) obligations on all transfers of 10 million won or more to foreign virtual asset service providers and personal wallets, the FIU will require each exchange to establish its own risk assessment and management system. The policy shift follows strong industry opposition to the original proposal included in the March legislative notice for amendments to the Act on Reporting and Using Specified Financial Transaction Information, with concerns raised about potential constitutional issues and excessive operational burdens on service providers.
FIU Shifts from Mandatory STR to Exchange Risk Management Systems
The FIU confirmed the regulatory change during the meeting on the 4th with digital asset exchange executives, according to industry sources. The original March enforcement decree amendment proposal required automatic STR filing for all cryptocurrency transactions of 10 million won or above involving overseas virtual asset service providers and individual wallets. Following consultation and feedback collection, authorities replaced the blanket STR obligation with a framework where exchanges assess risks and create their own management systems.
Financial Services Commission Financial Intelligence Unit. Source: FIU webpage
Travel Rule Threshold Removal and KYC Regulation Adjustments Maintained
The FIU maintained its decision to eliminate the minimum threshold for the Travel Rule, which previously applied to transactions of 1 million won or above. Regarding enhanced Know Your Customer (KYC) requirements, the regulator relaxed the approach by allowing exchanges to establish their own evaluation criteria. The FIU also decided to delay the business registration requirement setting debt ratios at 200% or below as of the most recent quarter-end by one year, taking into account operator circumstances. In response to industry requests for clarification on anti-money laundering (AML) evaluation standards for overseas service providers, the FIU plans to provide guidance through future explanatory documents.
Enforcement Decree Amendments Set for August 20 Implementation
The enforcement decree amendments to the Act on Reporting and Using Specified Financial Transaction Information, which include the Travel Rule threshold removal and major shareholder screening for virtual asset service providers, are scheduled for implementation on August 20 following review by the Ministry of Government Legislation and other agencies.
FAQ
What did South Korea's FIU decide regarding cryptocurrency overseas transfer reporting on the 4th?
The FIU changed its regulatory approach from imposing mandatory suspicious transaction reporting (STR) obligations on all cryptocurrency transfers of 10 million won or more to overseas entities, to requiring each exchange to establish its own risk assessment and management system.
Why did the FIU modify the original STR proposal from March?
The industry strongly opposed the blanket STR requirement citing potential constitutional issues and excessive operational burdens on service providers, leading authorities to adopt the exchange-managed risk assessment framework after collecting feedback.
