In a bid to curb capital flight, money laundering, and potentially risky speculation, the Financial Services Commission of South Korea has proposed an amendment restricting the use of domestic crypto credit cards for purchasing cryptocurrency on foreign exchanges.
This move by the country’s top financial regulator targets a loophole that has allowed Korean citizens to circumvent existing regulations limiting cryptocurrency purchases using traditional credit cards.
The proposed amendment, if implemented, would further tighten South Korea’s grip on the burgeoning crypto market, raising questions about its potential impact on individual financial freedom and the broader adoption of digital assets within the country.
Safety Nets Vs. Possible Threats To Financial System
The FSC underlined the pressing need to enforce restrictions on cryptocurrency dealers’ overseas exchange activity, noting possible threats to domestic funds and the financial system.
The goal of the amendment is to diversify the financing sources available to financial organizations that specialize in credit, with an expected enactment in the first half of the year, subject to review and resolution procedures.
A 2021 amendment to the financial reporting law mandates that cryptocurrency users in South Korea conduct transactions through withdrawal and deposit accounts on domestic exchanges, which must be authenticated using their actual names.
In order to offer fiat-to-crypto services, local trading platforms must also go through stringent regulatory requirements, which include forming an alliance with a local bank.
The FSC stated:
“Concerns have been raised with regards the illegal outflow of domestic funds overseas due to card payments on overseas virtual asset exchanges, money laundering and speculation.”
The proposed amendment aims to fortify existing regulatory measures by prolonging the prohibition on South Korean cryptocurrency credit cards and promoting cooperation with global payment giants such as Mastercard and Visa. This action is in line with South Korea’s continuous attempts to reduce the hazards related to virtual assets.
Meanwhile, the Anti-Corruption and Civil Rights Commission in South Korea recently discovered significant crypto trading activity among the nation’s legislators.
They have exchanged virtual assets totaling about 125 billion won ($97 million) during the last three years. The conclusions came from a 90-day examination of the 298 current MPs’ transaction records between May 30, 2020, and May 31, 2023.
The National Tax Service clarified earlier that anyone who retain virtual assets in decentralized, non-custodial wallets—such as cold wallets—will not be required to register foreign bank accounts. The goal of this initiative is to give users of decentralized cryptocurrency wallets in the nation access to a more open and accountable environment.
Crypto Adoption In South Korea
Presently, an approximated 2 million individuals, or 3.9% of the total population of South Korea, possess cryptocurrencies.
South Korea, which is home to cryptocurrency exchange titans such as Upbit, BitHumb, Korbit, and Gopax, witnessed its first surge in cryptocurrency popularity in 2017.
Around 30% of all global cryptocurrency trading occurs on the Korean market. At this time, it is permissible to own, trade, and purchase crypto assets in the country, as the government has not yet sanctioned them as official currency.
Featured image from Shutterstock
