South Korea’s Upcoming Regulation on Cross-Border Crypto Transactions
South Korea is set to introduce regulations concerning cross-border digital asset transactions, targeting a framework to be implemented by late 2025, as reported by Reuters on October 25.
Overview of the New Regulatory Framework
The Ministry of Finance has proposed a regulatory regime that will require Korean businesses engaged in cross-border cryptocurrency activities to adhere to new registration and reporting mandates.
Key Requirements for Businesses
- Businesses must pre-register with regulatory authorities.
- Monthly transaction reports must be submitted to the Bank of Korea.
- Enhanced monitoring to combat illegal cryptocurrency activities.
Definition and Classification Changes
The proposed regulations will clarify definitions for ‘virtual assets’ and ‘virtual asset operators’ under the Foreign Exchange Transactions Act. This initiative aims to categorize digital assets distinctly from traditional foreign exchange and payment systems, establishing a unique regulatory framework.
Deputy Prime Minister and Minister of Strategy and Finance, Choi Sang-mok, stated:
“We will establish new definitions of ‘virtual assets’ and ‘virtual asset operators’ in the Foreign Exchange Transactions Act. With this separate definition, virtual assets will be classified as a ‘third type,’ outside the scope of foreign exchange, payment instruments, or capital transactions.”
Context and Rationale
According to the Korea Customs Service, the nation has recorded approximately 11 trillion won (about $8 billion) in foreign exchange activities linked to criminal undertakings, with a staggering 81.3% attributed to cryptocurrency. This data underscores the government’s intention to safeguard the foreign exchange market from illicit crypto operations.
Implementation Timeline
The proposed regulations are expected to be enforced in the latter half of 2025 as the legislative process unfolds.
Historical Context and Regulatory Progress
In recent years, South Korea has made strides toward establishing a comprehensive regulatory framework for its digital asset sector. This effort has led to various initiatives, including the Virtual Asset User Protection Act, which enforces strict compliance and regular assessments within the fast-evolving industry.
As a result of these regulations, many investors have faced instances where their cryptocurrency holdings have been frozen on exchanges, limiting access to their funds.
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