Korea's crypto regulation at crossroads as rules tighten, tax delay proposed

A representation of virtual cryptocurrency bitcoin / Korea Times photo by Shim Hyun-chul

Korea’s cryptocurrency regulatory framework is reaching a crossroads, with rules tightening on one front while efforts are underway to delay taxation on investment gains.

Financial authorities plan to expand the “travel rule” for crypto transactions to cover all transfers, requiring exchanges to collect and provide transaction information, while also tightening registration and screening requirements for virtual asset service providers.

Meanwhile, a bill has been proposed to postpone the planned taxation of crypto investment gains by three years, reigniting debate over when such taxes should take effect.

According to the Financial Services Commission, the country’s financial regulator, an amendment approved Tuesday by the Cabinet will extend the travel rule to all crypto transfers, including those below 1 million won ($705). Under current rules, exchanges are required to share transaction information only for transfers worth at least 1 million won.

The change removes the threshold to prevent users from splitting transactions into smaller amounts to evade the rule.

The revised rules will also tighten screening requirements for virtual asset service providers. Reviews of legal violations, financial health and creditworthiness will now extend to major shareholders, in addition to operators, CEOs and executives already subject to scrutiny. Applicants will also have to provide detailed information on major shareholders, including their identities, nationalities and ownership stakes.