South Korea's Financial Services Commission (FSC) is suggesting changes to the Credit Finance Act with the primary goal of restricting local traders from purchasing cryptocurrency on foreign exchanges. The regulators believe that these amendments are necessary for tackling issues such as illegal movement of domestic funds, money laundering, and speculative behavior, which have become significant concerns.
The Financial Services Commission (FSC) is considering some changes in its rules, and they're talking about it in a legislative notice. Changes in its regulations are due to concerns about rising issues like illegal outflows, money laundering, and speculative behavior linked to cryptocurrency trading. The regulators are seeking public feedback on these proposed changes until February 13. A decision on implementing these changes is anticipated in the first half of 2024, following a review and voting process.
In 2021, South Korea updated its Financial Reporting Law, affecting users of local cryptocurrency exchanges. Now, if you're trading virtual assets within the country, you can only use deposit and withdrawal accounts where your identity can be confirmed. However, these rules don't apply if you're trading on foreign crypto exchanges. For local trading platforms to offer services involving converting cryptocurrency to regular money (fiat-to-fiat), they have to go through strict licensing processes, which include forming partnerships with local banks.
If the FSC's plan is approved, we might see big changes in the world of cryptocurrency. The regulators want to make crypto trading more regulated, especially when it comes to transactions on exchanges outside the country.
South Korea has a history of being strict on cryptocurrency, and there's been a recent development. In July 2023, the government had planned to introduce a 20% tax on cryptocurrency profits starting from the beginning of 2023. However, they decided to temporarily suspend this tax. Originally set to resume in 2025, the government has extended the suspension until that year.
In September 2023, South Korea revealed its intention to propose a bill targeting the tracking and freezing of North Korean crypto and virtual assets involved in supporting illicit weapons programs. The government also asked financial regulators to keep a close eye on the over-the-counter (OTC) crypto market to address the growing issue of money laundering.
South Korea is determined to enforce tough regulations to curb the rise of crypto-related crimes in 2024. The Financial Services Commission (FSC) is proposing amendments with a clear goal of preventing the increase in such crimes. It's important to highlight that the FIU IND, inspired by South Korea's approach, has sent notices to nine foreign crypto exchanges. These notices are related to non-compliance with the Prevention of Money Laundering (PML) Act and operating unlawfully.
In conclusion, South Korea's proposed amendments to restrict cryptocurrency purchases on foreign exchanges reflect the government's continued efforts to establish a secure and regulated environment for cryptocurrency trading. The focus on preventing illegal outflows, money laundering, and speculative behavior demonstrates a commitment to addressing potential risks associated with the growing popularity of cryptocurrencies within the country. If these amendments are accepted, they could mark a significant shift in the cryptocurrency landscape in South Korea.
Also read - Why FIU Registration Important For Crypto Exchanges Operating in India
