As a seasoned crypto investor with a significant portion of my savings in digital assets, I find South Korea’s move to regulate cross-border transactions a prudent step towards fostering a healthier and more transparent ecosystem. Having been through several market crashes and regulatory crackdowns, I have learned that the key to long-term success lies in governments taking proactive measures to combat illicit activities and ensure investor protection.
2025 is when South Korean officials aim to enact comprehensive regulations on international cryptocurrency transactions, targeting loopholes that foreign exchanges have been using for tax evasion purposes.
Koran Authorities To Regulate Cross-Border Crypto Transactions
As reported by South Korean news source Edaily, Deputy Prime Minister Choi Sang-mok discussed the nation’s intention to enforce regulations on cross-border cryptocurrency exchanges during a gathering of the G20 in Washington.
It was disclosed that the South Korean administration intends to establish regulations allowing oversight bodies responsible for international trades to track and exchange such transaction details with relevant financial institutions.
From the following year, South Korean authorities plan to introduce fresh interpretations of “virtual assets” and “operators of virtual assets” within their Foreign Transaction Act. These interpretations will classify virtual assets as a distinct category that does not fall under foreign exchange, external payment instruments, or capital transactions, as clarified by Choi on Thursday.
In my role as an analyst, I would express this as follows: From now on, when I’m dealing with cryptocurrencies, transactions made by foreign entities such as operators, customers, or personal wallets will be categorized as “cross-border crypto transactions.” It’s essential to note that any businesses managing these cross-border transactions involving crypto assets must comply with Korean financial regulations. This includes registering with the relevant authorities and submitting detailed reports of these transactions to the Bank of Korea on a monthly basis.
Choi pointed out that the data gathered would additionally be distributed to entities such as the National Tax Service, Korean Customs Service, relevant financial bodies, and major international financial hubs, for purposes of tracking illicit transactions, statistical analysis, and research.
Korea’s Increasing Demand For Cross-Border Transactions
During the G20 gathering, South Korea’s Deputy Prime Minister shared that their new regulatory strategy emerged in response to a rise in cryptocurrency trades across borders. Choi clarified that this uptick is mainly driven by the growing popularity of stablecoins, which function similarly to real foreign exchanges for cross-border transactions and payments.
Yet, since cryptocurrencies lack a legal foundation under the Foreign Exchange Transactions Act, it’s challenging to validate and control the escalating usage of these digital assets in cross-border transactions.
In recent times, there’s been a surge in the listing of stablecoins on local exchanges, with daily trading volumes surpassing 300 billion won this year, as compared to 191 billion won last year. Cross-border transactions using digital assets are on the rise, however, the legal status of these transactions remains undecided.
This apparently leaves a gap in oversight that’s been utilized for illicit activities, such as concealing illegal earnings, avoiding taxes, and committing tax evasion. According to the report, the National Tax Service and Korea Customs Service can only acquire details about cross-border cryptocurrency transactions either by making specific requests or by obtaining warrants for seizure.
Next year’s first half is when South Korea’s Ministry of Economy and Finance aims to finalize revisions to the Foreign Exchange Transactions Act and related laws. The plan is for an official monitoring system implementation, scheduled for the second half of 2025.
As an analyst, I’ll be discussing the potential integration of virtual assets into our existing system at the upcoming ‘Virtual Asset Committee’, led by the Financial Services Commission next month. The Ministry will also be involved in this discourse, exploring possibilities to utilize these digital assets not just for monitoring purposes, but as trading instruments for trade and capital transactions as well. This was concluded by Choi.
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2024-10-26 20:42