South Korean Crypto Firms Prepping to Meet the FATF Travel Rule

Key Insights

• South Korean crypto and blockchain businesses have started partnering with CODE, a joint venture, to meet FATF travel guidelines 
• Financial Action Task Force’s guidelines for virtual asset service providers (VASPs) are designed to combat money laundering and terrorist financing 
• CODE’s travel rule solution uses blockchain to record transactions and customer data on nodes operated by member entities in a distributed server

With the crypto regulatory landscape changing in South Korea, merchants and organizations are working alongside regulators to steer clear of forceful closures.

Around 30 South Korean crypto and blockchain firms have partnered with CODE to meet the Financial Action Task Force (FATF) travel rule to bring more transparency to the scene.

Crypto Travel Rules

FATF’s travel rule is a global set of guidelines for virtual asset service providers (VASPs) designed to combat money laundering and terrorist financing by requiring crypto firms to collect and disclose customer information for transactions above a threshold of $1,000.

To comply with FATF’s travel rule, different regulatory exchanges launched a joint venture for developing solutions around the regulation. 

Last year, in August, Bithumb, CoinOne, and Korbit had launched a joint venture — CODE, in South Korea. CODE is short for Connect Digital Exchanges. Notably, on 25 February, close to 30 South Korean crypto and blockchain organizations officially partnered with CODE. 

CODE completed testing its solution on its three shareholders — Bithumb, Coinone, and Korbit. Furthermore, Bithumb announced that CODE is reviewing partnerships with various domestic and international crypto service providers on Friday. 

The Way Forward for Koreans

South Korea has mandated the travel rule for all transactions over a million Korean won, equivalent to $831.59, which will be in effect from March 25.

A Bithumb report stated:  

“Code announced on the 25th that it had started to secure service partners by explaining the code system to domestic and foreign virtual asset providers (VASPs), including virtual asset exchanges, wallet operators, and custodians.”

Interestingly, however, South Korea’s largest crypto exchange Upbit’s operator Dunamu is not a CODE member and has developed its own travel rule solution VerifyVASP. 

That said, global exchanges have been hesitant to incorporate FATF’s travel rule owing to privacy concerns. However, South Korea will be one of the first countries in the world to embrace this condition for local businesses.

While the government had tightened control over cryptos in South Korea, some cryptos were saving the day across the globe. One such instance was seen when the Ukrainian army received an astonishing number of Bitcoin donations in one day.