Starting March 25, 2022, all Korean crypto exchanges are expected to flag any transfers and transactions worth more than 1 million Korean won or US$820 under the new regulation called Travel Rule.
This guideline was introduced by Korea’s Financial Action Task Force (FATF) on which all crypto rules and regulations of the country are based. It is designed to help authorities to track the movement of digital currencies between service providers to spot money laundering schemes.
Local crypto companies are scrambling to comply with the anti-money laundering requirements imposed by the Travel Rule. Only the big four platforms of the country, namely Korbit, Coinone, Bithumb and Upbit managed to comply with their requirements that are in line with the regulation.
However, this does not mean that there’s a standard for the Travel Rule which left some investors at a loss.
For Upbit, one of Korea’s biggest crypto exchanges, the implementation of its home-grown VerifyVASP program was done to comply with the newest regulation. The platform will then subject any deposits above the threshold to the Travel Rule while other smaller deposits will remain unaffected.
On the other hand, Bithumb, Korbit and Coinone partnered with one another to launch their system called CODE to comply with the new rule. As of press time, VerifyVASP and CODE are not compatible with one another.
Moreover, Bithumb applied the travel rule limits to all transaction amounts regardless of whether they met the threshold or not.
The lack of standard criteria, as well as a system, can leave countless domestic users clueless about how to go about their crypto transactions according to crypto venture capital Hashed Chief Operating Officer (CEO) Simon Kim.
‘In a state where the infrastructure was not prepared, a regulatory body with low understanding was forced to push forward. It is expected that revisions will follow to an appropriate level with criticism from the Korean community,’ he said in an interview with Cointelegraph.
Despite the polarised opinion about the new regulation, industry experts in South Korea are confident that it will do more good than harm to the crypto industry in the long run, according to a report released by Forkast, a crypto news site.
‘In 1993, Korea started the real-name financial system. It helped uncover the underground economy and effectively prevented slush funds or illegal funds from forming. Perhaps you can look at the travel rule as a crypto version of the real-name system,’ Hwang Suk-jin, an information security professor at Dongguk University told Forkast.
‘The travel rule will be the first step in protecting investors and in building a healthy virtual asset market,’ Hwang added.
The most that will be affected by this regulation are investments in decentralised finance (DeFi) and non-fungible tokens, according to Sandbank CEO Paik Hoon-jong.
‘Skilled investors will understand what’s happening with each exchange, but there are a lot more who do not,’ he said.
However, he said that investors in DeFi aren’t just people making small money out of crypto, adding that most of them are investors.
‘Of course, [the travel rule] adds inconvenience, but won’t affect their [investments] greatly,’ he added.
Learn more about the Travel Rule in South Korea with the latest cryptocurrency updates in Cryptoshimbun.