South Korea is getting serious again about regulating cryptocurrency. Finance Minister Choi Sang-Mok announced their plans to tighten the reins on cross-border crypto transactions to tackle issues like tax evasion and foreign exchange crimes.
No transactions outside of the government’s permission
During a G20 meeting in Washington, Choi explained that the country will introduce new reporting requirements for businesses involved in these transactions, so any company handling cross-border crypto assets will need to pre-register with the authorities and provide monthly reports to the Bank of Korea.
Choi explained the need for proactive monitoring of virtual asset transactions that could be used for dodging taxes or manipulating currency rates across borders.
He pointed out that right now, cross-border crypto transactions are a blind spot for South Korea’s tax and customs services.
This gap allows criminals to hide their illicit gains and carry out illegal activities more easily.
To put things in perspective, the Korea Customs Service revealed that 81% of foreign exchange crimes, amounting to about $1.2 billion since 2020, are tied to digital assets.
But interestingly, they didn’t reveal how much was the amount of crimes tied to korean won, or for example the US dollar in the same period. Weird, huh.
New assets, new laws
Before these new rules can take effect, the government needs to lay down a solid legal foundation.
Choi mentioned plans to redefine terms like “virtual assets” and “virtual asset business operators” in the Foreign Exchange Transactions Act.
This new definition will categorize virtual assets as a third type of assets that doesn’t fall under existing foreign exchange or capital transaction laws.
He expects these legal revisions to wrap up by the first half of 2025, with the new reporting requirements rolling out by the second quarter.
For our safety
South Korea isn’t just stopping at cross-border regulations, but they’ve been busy introducing a range of new rules aimed at protecting crypto investors.
The Virtual Asset Protection Act went into effect on July 19, requiring virtual asset service providers, or VASPs to adopt stricter-than-before measures for safeguarding user assets.
These laws mandate that VASPs secure insurance against hacks and other malicious attacks.
Plus, they must keep user assets separate from exchange tokens and store customer deposits in banks while regularly reviewing token listings on exchanges.
And if anyone thinks they can get away with crypto crime? Mm, no. South Korea plans to impose big penalties on offenders, including jail time and fines that could be three to five times the amount of illegally gained profits.
The country is stepping up its game in the crypto world, for safer transactions and stronger protections for investors. It looks like things are about to get a lot more interesting!
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