South Korea Expands Travel Rule to All Crypto Transactions, Tightens AML Framework

VADODARA, February 5, 2026 — South Korea's Financial Services Commission (FSC) announced a significant expansion of its Travel Rule, lowering the reporting threshold to cover all virtual asset transactions. This move, detailed in a briefing to the National Assembly's Political Affairs Committee, aims to combat money laundering and cross-border crime. According to the official FSC statement, the commission will now require reporting for transactions under 1 million won (approximately $750), previously exempt. This latest crypto news signals a major regulatory tightening in a key Asian market, coinciding with global extreme fear sentiment.

Investigation: FSC's Regulatory Overhaul and Travel Rule Expansion

The FSC plans to strengthen its anti-money laundering (AML) framework specifically for digital assets. In its February 5 briefing, the commission confirmed it is pushing to expand the Travel Rule's coverage. Currently, South Korea mandates Travel Rule compliance for transactions of 1 million won or more. The new policy eliminates this threshold, applying the rule to all transactions. This requires virtual asset service providers (VASPs) to collect and share sender and recipient information for every transfer.

, the FSC stated it would support data integration to foster AI transformation in finance. It also committed to establishing a comprehensive regulatory system for digital assets. Market structure suggests this expansion could strain exchange operations. Increased compliance costs may lead to liquidity fragmentation. On-chain data indicates similar regulatory moves in other jurisdictions often precede short-term sell-offs.

Market Context & Historical Precedent

Historically, South Korea has been a proactive regulator in the crypto space. The country implemented strict Know Your Customer (KYC) rules and banned anonymous trading years ago. This Travel Rule expansion follows a global trend of tightening AML standards. For instance, the Financial Action Task Force (FATF) has urged member countries to enforce the Travel Rule since 2019. South Korea's move aligns with this international pressure.

In contrast, the timing raises questions. The announcement comes amid extreme market fear, with Bitcoin down over 6% in 24 hours. Regulatory news often amplifies negative sentiment during downturns. This pattern mirrors the 2021 cycle when Korean regulations contributed to local premium disappearances. Underlying this trend is a broader institutional shift toward compliance over innovation.

Related developments highlight ongoing regulatory scrutiny: a recent probe into a former Upbit CEO and US firms proposing stablecoin compromises show global coordination.

Technical Architecture & Price Action

Market structure currently shows Bitcoin testing critical support levels. The price sits at $72,004, down 6.03% in 24 hours. Key technical levels include the Fibonacci 0.618 retracement at $69,500 from the last major swing high. This level acts as a liquidity grab zone. A break below would indicate weakening institutional support.

Additionally, the 50-day moving average near $75,000 now acts as resistance. The Relative Strength Index (RSI) is approaching oversold territory, but regulatory news can delay reversals. Order block analysis reveals significant sell-side liquidity above $74,000. This creates a Fair Value Gap (FVG) that price may need to fill before any sustained recovery. Volume profile shows thinning activity, typical during fear-driven sell-offs.

By The Numbers

Why It Matters

This regulatory expansion matters for several reasons. First, it directly impacts South Korean exchanges like Upbit and Bithumb. They must now implement systems to track all transactions, not just large ones. This increases operational costs and may force smaller players to consolidate or exit. Second, it affects cross-border liquidity. The Travel Rule requires VASPs to share data internationally, potentially slowing transaction speeds.

Third, it sets a precedent for other Asian markets. Japan and Singapore may follow suit, creating a regional regulatory bloc. Fourth, it influences institutional adoption. Stricter AML frameworks can deter traditional finance entry due to compliance complexity. However, they also legitimize the asset class for risk-averse investors. The FSC's push for data integration and AI hints at a surveillance-heavy future, as outlined in broader FATF guidelines.

Expert Commentary

"The FSC's move to eliminate the Travel Rule threshold is a double-edged sword. While it strengthens AML controls, it imposes significant technical burdens on exchanges. Market data shows that similar regulations in 2023 led to a 15% drop in Korean exchange volumes within three months. The key watchpoint is whether this drives innovation in compliance tech or simply stifles activity." — CoinMarketBuzz Intelligence Desk

Market Outlook & Price Scenarios

Two primary scenarios emerge from current market structure. Scenario A: Regulatory clarity eventually stabilizes markets. Exports adapt to new rules, reducing uncertainty. Bitcoin holds the $69,500 Fibonacci support and reclaims $75,000. Scenario B: Compliance costs escalate, causing liquidity outflows from Korean exchanges. This exacerbates selling pressure, breaking key supports.

• Bullish Invalidation Level: $75,000. A sustained break above this resistance, confirmed by rising volume, would negate the bearish short-term structure and suggest the market has priced in the regulatory news.
• Bearish Invalidation Level: $69,500. A daily close below this Fibonacci 0.618 support would indicate a failure of institutional bids, likely leading to a test of $65,000.

The 12-month outlook depends on global regulatory coordination. If other major economies mimic South Korea's approach, a standardized AML framework could emerge. This might initially suppress prices but eventually attract institutional capital seeking compliant entry points. Over a 5-year horizon, such regulations could integrate crypto into traditional finance, albeit with reduced anonymity.