South Korea plans to strengthen regulations on cross-border cryptocurrency transactions to combat foreign exchange crime, Minister of Economy and Finance Choi Sang-mok announced at a G20 meeting in Washington.
Companies handling cross-border stablecoin and cryptocurrency transactions will be required to pre-register with authorities and submit monthly transaction reports to the Bank of Korea.
Transaction data will be reviewed by South Korea’s tax, customs, financial and international regulators to identify and prevent illegal activities, including money laundering and illegal arbitrage. According to the Korean Customs Service, about 88% of foreign exchange crimes, totaling about 1.65 trillion won ($1.2 billion), involved cryptocurrency.
To support the new regulatory framework, the Ministry of Economy and Finance plans to amend the law on foreign exchange transactions by introducing a separate category for “virtual assets” and “virtual asset business operators”.
These changes will differentiate crypto transactions from traditional foreign exchange and payment methods. The revised law is expected to be finalized by mid-2025, and reporting and monitoring measures are expected to be launched in the second half of the year.
South Korea has already taken steps to regulate its digital assets sector, implementing investor protection rules in July. The government is also working on additional regulations to standardize the issuance, distribution and disclosures of cryptocurrencies.
Additionally, South Korea’s financial regulator is reviewing the ban on local spot cryptocurrency ETFs and institutional accounts on cryptocurrency exchanges, aiming to expand beyond its current market-focused retail.
The South Korean government also plans to extend its foreign exchange regulations to cross-border transactions involving dollar-pegged stablecoins.
The Ministry of Economy and Finance announced today that it is reviewing measures to ensure the stability of stablecoin transactions.
The ministry noted that stablecoins, beyond their role in the crypto ecosystem, are increasingly used for cross-border transactions, which may require different rules due to their global transfer capabilities.
South Korea’s Financial Services Commission (FSS) will prioritize the regulation of stablecoins in the next phase of the country’s Virtual Asset User Protection Law. The FSS plans to consult with international regulators, including those in Japan and the European Union, although no specific timetable has been set for these discussions.
The regulations will begin by establishing a legal framework for the issuance of stablecoins linked to the South Korean won. Once in place, similar rules will be developed for stablecoins linked to foreign currencies.
South Korea’s right-wing political party has proposed delaying the taxation of cryptocurrency gains by three years. If passed, the taxation of the country’s crypto gains will be pushed back from early 2025 to 2028.
A 20% tax on crypto gains was initially scheduled to take effect on January 1, 2022, but was pushed back twice until January 1, 2025, due to strong backlash from investors and industry experts.
