South Korea is reportedly planning to increase its oversight of cross-border transactions involving cryptocurrencies in a bid to combat tax evasion and “foreign exchange” crimes, according to the country’s finance minister, Choi Sang-Mok, at a G20 meeting in Washington.
Choi said South Korea will introduce a reporting mandate for any business that handles “cross border transactions” involving crypto assets, according to an Oct. 24 report from local Korean news outlet Edaily.
“We will promote preemptive monitoring of virtual asset transactions that are used for tax evasion and currency manipulation across borders,” said Choi.
Under the new rules, any business that handles cross-border crypto transfers will be required to pre-register with the relevant authorities and report all details to the Bank of Korea on a monthly basis.
Choi said that cross-border transactions involving crypto were currently a “blind spot” for the country’s tax and customs services. These blind spots are reportedly being abused by criminals, who exploit the case-by-case nature of enforcement to conceal criminal proceeds and conduct illegal transactions.
According to the Korea Customs Service, 81% of foreign exchange crimes — roughly $1.2 billion since 2020 — have been related to digital assets.
However, before the new rules can be put into force, the government says it will need to establish a proper legal basis for them.
“We will establish new definitions of ‘virtual assets’ and ‘virtual asset business operators’ in the Foreign Exchange Transactions Act, and with this separate definition, we will define virtual assets as a ‘third type’ that is not included in foreign exchange, external payment means, or capital transactions,” explained Choi.
The finance minister said he expects the legal revisions to be finished by the first half of 2025, with the new reporting mandates to be implemented by Q2.
South Korea has recently introduced a swathe of new regulations to protect crypto investors.
On July 19, its Virtual Asset Protection Act came into effect, compelling virtual asset service providers (VASPs) in the country to maintain stricter rules to protect user assets.
The laws require VASPs to take out insurance against hacks and malicious attacks. They also mandate that providers keep user assets separate from exchange tokens while keeping customer deposits in banks and regularly reviewing token listings on exchanges.
The South Korean government will also impose severe punishments on perpetrators of crypto crime, including jail sentences and fines of three to five times the amount of illegally acquired profits.
