- South Korea to introduce advanced monitoring of international cryptocurrency transactions, aligning with foreign exchange regulations.
- New regulations mandate preemptive reporting of transaction details, enhancing oversight to combat tax evasion and money laundering.
On October 24, 2024, South Korea’s Deputy Prime Minister and Minister of Strategy and Finance, Choi Sang-mok, announced plans to implement a new regulatory framework for monitoring international cryptocurrency transactions, similar to foreign exchange operations. This initiative, revealed during his visit to Washington D.C. for the G20 Finance Ministers and Central Bank Governors’ meeting, aims to combat tax evasion and money laundering.
The new regulations, set to be introduced in the latter half of the next year, will require all international cryptocurrency transactions to be reported in advance, marking a significant policy shift towards the integration of cryptocurrency operations within the formal regulatory perimeter of foreign exchange laws.
The backdrop of this regulatory update is the increasing complexity and volume of international transactions involving cryptocurrencies, particularly stablecoins, which are pegged to traditional currencies like the U.S. dollar and serve as a method for cross-border trade and payments.
During his press briefing, Choi emphasized the need for legislation that could accommodate the nuances of cryptocurrencies, separating them from traditional foreign exchange and financial instruments.
“Recently, stablecoin listings on domestic exchanges are on the rise, and the daily trading volume last year was around 191.1 billion won, but this year it has already exceeded 300 billion won. Transactions related to virtual assets are increasing, but their legal nature is still unknown.” “There was no agreement on this,” the issue explained.
He outlined that the proposed legislation would redefine cryptocurrencies and cryptocurrency operators, introducing them as a new category under the Foreign Exchange Transactions Act.
The proposed changes are expected to provide the legal basis for preemptive monitoring of cryptocurrency transactions by financial authorities, ensuring that all activities are reported and recorded. This measure aims to close the loopholes that have allowed for the misuse of digital assets in evading sanctions, laundering money, and other illicit financial activities.
Cryptocurrency exchanges and businesses operating within South Korea and those engaging with South Korean nationals will be required to register and regularly report their transaction details to the Bank of Korea.
This will enable not only a tighter control over financial flows but also facilitate better data sharing and cooperation between tax, customs, and financial regulatory bodies.
The draft legislation also plans to extend reporting requirements to individual wallets and foreign cryptocurrency operators, ensuring comprehensive monitoring and compliance enforcement. This aligns with international efforts to standardize cryptocurrency regulations and combat the financial crimes associated with its trade.
