Travel Rule to Apply to Coin Transactions Under 1 Million Won... VASP Registration Requirements Strengthened

Special Act Amendment Approved by Cabinet

VASPs Must Maintain Debt Ratio Below 200%

Major Shareholder Eligibility Strengthened... Exceptions Provided

From now on, information provision requirements (Travel Rule) will be applied even to cryptocurrency transfers involving transactions under 1 million won. As financial soundness and large shareholder qualification reviews for Virtual Asset Service Providers (VASPs) are strengthened, the threshold for official registration will also increase.

The Financial Intelligence Unit (FIU), under the Financial Services Commission, announced on August 11 that the revision to the Enforcement Decree of the Act on Reporting and Use of Certain Financial Transaction Information (the “Certain Financial Information Act”) was approved at a Cabinet meeting.

With this revision, the scope of the information provision obligation (Travel Rule) for cryptocurrency transfers between registered VASPs will be expanded. Previously, the Travel Rule applied to transactions of 1 million won or more, but from now on, this requirement will cover all cryptocurrency transfer transactions. Businesses that receive virtual assets from transfer transactions will also be subject to obligations to secure information in order to prevent regulatory evasion through split transfers and to prevent money laundering.

When a registered VASP transfers virtual assets to or from an overseas VASP or a personal wallet, transaction permissions will vary according to the level of risk. If a business conducts transactions of 10 million won or more, it must establish and operate a suspicious transaction monitoring system.

The requirements for VASP registration will also be tightened. The definition of large shareholders subject to registration review is expanded to include shareholders who appoint a majority of directors or executives and, if the largest shareholder is a corporation, also the largest shareholder and representative of that corporation.

Businesses must have a debt-to-equity ratio of 200% or lower at the time of registration, and must not have a record of undermining credit order through defaults or similar incidents in the past three years. Registration will be restricted if the business qualifies as a troubled financial institution, or if its business licenses or approvals have been revoked under financial laws. In addition, businesses must be equipped with personnel and an organization with expertise in cryptocurrency transactions, as well as the necessary IT and security infrastructure, and an internal control system to protect users. However, existing businesses will be granted a one-year grace period regarding the requirement for a debt ratio below 200% and for internal controls such as personnel, organization, and IT infrastructure.

Large shareholders, representatives, executives, and other key personnel of VASPs must not have a criminal record involving fines or more severe punishment for violations of anti-money laundering or financial statutes. Large shareholders will be exempt from disqualification if the violation was minor or if their criminal penalty was imposed solely under joint liability laws.

The revision also includes provisions allowing certain powers to notify relevant authorities of disciplinary action against former employees of financial institutions, who resigned after violating the Certain Financial Information Act but before being sanctioned, to be delegated to the Financial Supervisory Service or other inspection agencies.

The new provisions relating to VASP registration and post-retirement sanctions for employees will take effect on August 20. Other changes will come into force six months after the promulgation of the revised regulation.

The FIU has prepared an amended registration manual reflecting the strengthened registration system, including items to be reported, the required documents, and reporting deadlines. The FIU also plans to hold public information sessions jointly with the Financial Supervisory Service for VASPs.

This content was produced with the assistance of AI translation services.