South Korea’s New Regulatory Amendment
In a significant regulatory shift, South Korea has enacted a new amendment to the Foreign Exchange Transactions Act, aiming to strengthen oversight on companies that facilitate the transfer of cryptocurrency across borders. Under this updated legislation, any organization involved in international transactions of virtual assets will be required to register with the finance minister, marking a pivotal change in how these transactions are administered.
Scope of the Regulation
This new regulation applies to a variety of businesses operating within the crypto space, including exchanges and custody services, provided they engage in buying, selling, or exchanging virtual currencies between South Korea and other nations. A noteworthy aspect of the amendment is the establishment of a new classification known as “virtual-asset transfer service,” which streamlines the government’s ability to monitor operators involved in overseas crypto movements, particularly those concerning stablecoins.
Government Intentions and Industry Concerns
Authorities have expressed intentions to incorporate these transactions into a comprehensive foreign-exchange oversight system.
Rep. Lim I-ja, who leads the Strategy and Finance Committee in the National Assembly, has articulated that this initiative is intended to create a systematic approach for monitoring virtual assets, ultimately nurturing a robust foreign-exchange marketplace.
Concurrently, this legislative change is occurring amidst South Korea’s broader efforts to enhance compliance regulations surrounding cryptocurrencies. Industry representatives have flagged potential issues regarding proposed modifications to the Travel Rule, particularly the planned elimination of the existing 1 million won threshold for crypto transfers. These stakeholders have conveyed concerns that the expansion of compliance checks could lead to transaction delays, complicate return processes, and pose risks of losses for users due to market fluctuations during verification periods.
Taxation Framework for Virtual Assets
Furthermore, preparatory steps are underway for a taxation framework on virtual asset profits, set to take effect on January 1, 2027. Gains exceeding 2.5 million won will incur a cumulative tax rate of 22%, comprising 20% income tax and 2% local income tax. The National Tax Service is collaborating with major exchanges such as Upbit, Bithumb, Coinone, Korbit, and Gopax to prepare guidance for stakeholders. Investors affected by these changes can expect the first full filing period to occur in May 2028, addressing income accrued in the previous year.
Background and Future Outlook
This move to regulate cross-border crypto activities has been in the pipeline for over a year, with earlier reports from Reuters in 2024 indicating the finance ministry’s intentions to implement registration and monthly reporting obligations for businesses engaged in international cryptocurrency transactions.
