Korean crypto exchanges rush to employ travel rule for cross-border coin trade

As many as 14 South Korean cryptocurrency exchanges must be equipped with travel rule solution enabling sharing and recording of digital asset transfer information between sender and receiver by March under the new Korean mandate aimed to prevent illegal digital assets trading activities such as tax evasion and money laundering.

Bithumb, Coinone, and Korbit on Wednesday said they have jointly developed a blockchain technology-based system that will allow them to meet the so-called travel rule, a global regulation requiring digital asset firms to obtain, hold and share customer information with other service providers, like regular bank remittance. Their travel rule solution, dubbed Code, is designed to share their customers’ personal data, such as sender’s legal name, address, and nationality, in compliance with intergovernmental organization Financial Action Task Force’s rules.

Seoul will obligate the travel rule from March 25, 2022. in Korea under which all exchanges must comply in the cross-border digital coin trade. As of Wednesday, a total of 14 exchanges are subject to the regulations – top four exchanges (Upbit, Korbit, Coinone, and Bithumb) that have gained approval for Korean currency-based trade, and 10 others including g Flybit and GDAC that are allowed for bitcoin-based trade.

The new rule would bring digital assets closer under the regulatory radar as records would be left in cross-border transaction watch.

It can cover the blind spot in monitoring illegal activities such as money laundering via digital coins. Until now, digital asset transfer has required only the wallet address, or private keys similar to a password for logging into an e-mail account, making money laundering easy.

While Bithumb, Coinone, and Korbit have partnered to build Code, the country’s largest crypto exchange Upbit is working on its own travel rule solution, named VerifyVASP, using blockchain technology developed by local startup Ramda 256.

The three exchanges already have attracted 80 financial companies to adopt their solution, while Upbit just began recruiting partners in October.

Experts, however, warn the travel rule could open up to different financial crimes such as data breaches amidst the lack of a centralized governing body.

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