South Korean authorities have announced their plan to fully regulate cross-border crypto exchanges by the end of 2025 to combat the “blind spot” that allows tax evasion through foreign exchange.
Koran Authorities to Regulate Cross-Border Crypto Exchanges
According to local media outlet Edaily, South Korea’s Deputy Prime Minister (DPM) Choi Sang-mok shared the country’s plan to control cross-border crypto transactions at the Group of 20 (G20) meeting in Washington.
Choi revealed that the Korean government plans to create a legal basis for foreign exchange supervisory authorities to monitor these funds and share them with the relevant financial authorities.
Starting next year, Korean authorities will create new definitions of “tangible assets” and “tangible asset operators” in the Foreign Exchange Law. These definitions “will define physical assets as ‘third type’ that are not included in foreign exchange, foreign payment instruments, or capital transactions,” Choi explained on Thursday.
As a result, crypto deposits and withdrawals made by foreign operators, customers, and personal wallets will be defined as “cross-border crypto activity.” Additionally, companies handling cross-border transactions involving crypto assets must register with the Korean financial authorities and report transaction information to the Bank of Korea every month.
Choi noted that the collected information will be shared with the National Tax Service, Korea Customs Service, financial authorities, and international financial institutions to monitor illegal statistics, analysis, and research.
Korea’s Growing Demand for Cross-Border Outsourcing
At the G20 meeting, South Korea’s DPM explained that the new regulation comes amid an increase in cross-border crypto transactions. Choi attributed the recent increase to the popularity of stablecoins, as they can be used for cross-border transactions and payments “as a real international exchange.”
However, the huge demand for cross-border transactions using crypto-assets cannot be verified and controlled as there is no legal basis for crypto-assets in the Foreign Exchange Act.
Recently, stablecoin listings have increased in domestic exchanges, and the daily trading volume has already exceeded 300 billion won this year, from 191 billion won last year. Cross-border transactions involving physical goods are increasing, but their legal status is not yet agreed upon.
This creates a “blind spot” that has allegedly been exploited for illegal activities, concealment of proceeds of crime, and tax evasion. According to the report, the National Tax Service and Korea Customs Service rely on case-by-case requests or seizure warrants to obtain information about cross-border crypto transactions.
South Korea’s Ministry of Economy and Finance plans to complete the revision of the Foreign Exchange Act and related regulations in the first half of next year. Authorities reportedly expect to officially implement the monitoring system in the second half of 2025.
“Whether or not to legally include physical assets in the system, such as using them as a trading tool for trade or financial activities without a monitoring system, will be discussed at the ‘Committee on Physical Assets’ which will be presented next month under the leadership. of the Financial Services Commission, and the department will participate,” Choi concluded.
Total crypto market capitalization is at $2.27 trillion in the weekly chart. Source: TOTAL on TradingView
Featured image from Unsplash.com, Chart from TradingView.com
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