South Korea's Regulations on Cryptocurrency and Travel Rules - Comprehensive Guide for 2024
New Regulations Strengthen Crypto Sector in South Korea
In a significant move to bolster consumer protections and promote transparency in the crypto industry, South Korea has introduced new regulations for Virtual Asset Service Providers (VASPs). These regulations, set to take effect in 2024, are designed to align the virtual asset sector more closely with conventional financial regulatory standards.
Enhanced Reporting and Transparency
Under the Act on Reporting and Using Specified Financial Transaction Information, VASPs are mandated to file detailed reports to the Korea Financial Intelligence Unit (KoFIU). This requirement aims to improve transaction transparency and enable better monitoring of virtual asset transfers.
Stronger Governance and Risk Management
To strengthen operational oversight, VASPs are required to have at least three directors. They must also conduct ongoing, dynamic monitoring of customer transactions and behaviours, supporting continuous evaluation of risks and suspicious activities.
Robust KYC and AML Compliance
VASPs must implement robust Know Your Customer (KYC) procedures and adhere to Anti-Money Laundering (AML) requirements, including appointing a money laundering reporting officer, conducting risk assessments, and keeping records.
Secure Information Transmission
When transferring payments between VASPs, the originator’s and beneficiary’s information must be transmitted securely and confidentially to combat fraud and increase transparency.
Deposit Protection Enhancements
Deposit protection coverage has been raised to KRW 100 million effective September 2025, benefiting users of financial services potentially including crypto-related financial products.
Market Discipline and Prohibited Activities
VASPs are prohibited from improper use of undisclosed material information, manipulating market prices, fraudulent transaction activities, and self-issued virtual asset transactions. If unfair transaction activities are performed by VASPs, staff members are subject to minimum imprisonment of one year or a fine of at least 3-5 times the unfairly gained profits.
Separation of Customer Assets
VASPs must keep virtual assets owned by their customers separately from the virtual assets in their possession.
The Financial Services Commission (FSC) of South Korea, the main regulatory body responsible for formulating policies and supervising VASPs, has passed this new Act to ensure crypto user protections, transaction transparency, and market discipline. The FSC also plans to permit the issuance and circulation of security tokens.
In addition, VASPs, including foreign ones, are required to report their business activity to the KoFIU prior to the commencement of their business operations. A certain proportion of virtual assets in South Korea must be stored in cold wallet storage, as determined by a presidential decree.
These regulatory updates collectively aim to improve consumer safeguards, promote clear and traceable transactions, and impose stronger market discipline on the crypto industry in South Korea.
- The new regulations in South Korea for Virtual Asset Service Providers (VASPs) will align the virtual asset sector more closely with conventional financial regulatory standards, a significant move for the crypto industry.
- As per the Act on Reporting and Using Specified Financial Transaction Information, VASPs will be mandated to file detailed reports to the Korea Financial Intelligence Unit (KoFIU), aiming to improve transaction transparency.
- To combat fraud and increase transparency, when transferring payments between VASPs, the originator’s and beneficiary’s information must be transmitted securely and confidentially.
- The Financial Services Commission (FSC) of South Korea plans to permit the issuance and circulation of security tokens, in addition to its efforts to ensure crypto user protections, transaction transparency, and market discipline.
