Why the Travel Rule Doesn’t go Far Enough

As governments worldwide intensify their scrutiny of digital assets, Thailand is the latest nation to signal a major regulatory shift. Following in the footsteps of jurisdictions like South Korea, Thailand’s Securities and Exchange Commission (SEC) has proposed implementing the Crypto Travel Rule for all transactions, regardless of size. This ‘zero-threshold’ approach aims to definitively close the loopholes exploited by illicit actors and align the nation's digital asset market with strict global anti-money laundering (AML) standards.

Traditionally, the Financial Action Task Force (FATF) has recommended a $1,000 USD threshold for the Travel Rule. However, global regulators are increasingly finding that bad actors bypass these limits through ‘smurfing’ - breaking large sums into multiple smaller, unmonitored transfers. To combat this, the Thai SEC, in collaboration with the Anti-Money Laundering Office (AMLO) following a January 2026 resolution, has recently outlined stringent new obligations for Virtual Asset Service Providers (VASPs). Under the proposed principles, firms must adhere to:

• Universal Data Transmission: Operators must collect and share detailed identifying information for both the originator (sender) and the beneficiary (receiver) for every single transfer, executing this simultaneously with the transaction.
• Strict Incoming Compliance: VASPs must establish robust internal policies to handle incoming transfers that lack the required Travel Rule data. This includes the authority to reject non-compliant transactions or immediately freeze suspicious funds.
• Five-Year Data Retention: All transaction and identity records must be securely stored for a minimum of five years to facilitate retrospective criminal investigations.

According to SEC Secretary-General Pornanong Budsaratragoon, these measures are essential steps in allowing businesses to detect and prevent fraudulent transactions, countering cybercrime and increasing the efficiency of asset recovery. Nor is the SEC alone in its war on fraud; it is working with the Bank of Thailand, police, and the Anti-Money Laundering Office on the campaign

The urgency of this regulation is highlighted by recent enforcement actions. Thai crypto platforms reportedly froze over 10,000 accounts suspected of laundering funds during a recent crackdown. This follows a massive 2025 campaign where nearly 48,000 ‘mule accounts’ were frozen. By forcing the crypto sector to adopt the same rigorous tracking as traditional finance, Thai authorities aim to strip away the anonymity that facilitates financial fraud.

Although the regulatory intent is clear, the operational reality for Thai VASPs will be challenging. Mandating real-time data transmission and risk assessment for every micro-transaction places an immense technical and financial burden on crypto exchanges and wallet providers. Furthermore, industry advocates warn of a potential unintended consequence. With these changes, FATF guidelines would be implemented unevenly across the globe. Enforcing rules significantly stricter than the baseline could push users to unregulated or loosely regulated offshore platforms. This dynamic puts pressure on the SEC to not only monitor domestic businesses but to potentially implement strict blocks against non-compliant foreign exchanges to protect its interest - similar to strategies seen in South Korea which tighten control and reduce fraud but massively impact the resources required to police it.

So whilst the importance and impact of removing transaction thresholds are understandable, when they are eliminated, the sheer volume of data that must be processed in real-time skyrockets. Manual compliance checks or outdated verification systems will inevitably lead to bottlenecked transactions, delayed withdrawals, and a degraded user experience - all of which impact business.

This is where pre-verified identity networks, such as Blockpass, become essential infrastructure. By allowing users to control a reusable, verified identity profile, VASPs can instantly fulfill zero-threshold Travel Rule requirements without forcing customers through repetitive KYC checks for every small transfer. Solutions like this are critical to ensuring that a highly regulated market remains fluid and economically viable, cutting down on costs while keeping platforms secure.

Whilst the Thai SEC is currently seeking public and stakeholder feedback on these proposed principles, with the consultation window open until March 25, 2026, with this proposed move it seems clear that the era of anonymous, small-scale transfers must come to an end.