As a seasoned researcher with a keen interest in the intersection of finance and technology, I find the recent developments in South Korea’s regulatory approach towards cryptocurrencies both intriguing and commendable. Having delved into numerous cases of tax evasion and financial crimes involving digital assets, it is clear that the current gaps in regulation are being exploited by unscrupulous actors.
It appears that South Korea is contemplating tightening its control over cross-border cryptocurrency transactions as a means to curb tax evasion and illegal activities related to foreign exchange, as suggested by Finance Minister Choi Sang-Mok during the G20 gathering in Washington.
According to a report by the Korean news outlet Edaily on October 24th, Choi announced that South Korea will require any businesses dealing with cross-border cryptocurrency transactions to report these activities.
Choi stated, “We plan to actively monitor virtual transactions aimed at tax dodging and foreign exchange manipulation before they occur.
According to the latest regulations, businesses dealing with international cryptocurrency transactions must register beforehand with the appropriate government bodies. On a monthly basis, they are also obligated to submit detailed reports to the Bank of Korea.
Choi stated that at present, cross-border crypto transactions pose a gap in the country’s tax and customs oversight, which is allegedly being taken advantage of by criminals. They manipulate the individual enforcement approach to hide illicit funds and carry out unlawful activities.
Based on reports from the Korea Customs Service, a significant proportion of illegal activities involving foreign exchange – approximately $1.2 billion worth since 2020 – have been linked to digital assets.
As a crypto investor, I understand that before these new regulations can take effect, the government has indicated they’ll need to set a solid legal foundation for them first.
In simple terms, Choi explained that we plan to create distinct definitions for ‘virtual asset holders’ and ‘operators of virtual asset businesses’ within the Foreign Exchange Transactions Act. With these new definitions, we will classify virtual assets as a ‘third category’, separate from foreign exchange, external payment methods, or capital transactions.
According to the finance minister, it’s anticipated that all necessary legal adjustments will be completed by mid-2025. Following this, the new reporting requirements will likely be put into effect during the second quarter of the same year.
South Korea has recently introduced a swathe of new regulations to protect crypto investors.
Beginning on July 19, the Virtual Asset Protection Act was enforced, mandating virtual asset service providers within the nation to implement more stringent regulations aimed at safeguarding users’ assets.
According to the regulations, Virtual Asset Service Providers (VASPs) must obtain insurance coverage for potential cyber-attacks and malicious actions. Furthermore, they are obligated to maintain user assets distinct from exchange tokens, while storing customer deposits in banks and periodically reviewing the listings of tokens on exchanges.
In addition, the South Korean authorities plan to mete out stiff penalties to offenders involved in cryptocurrency-related crimes. These penalties range from imprisonment to fines that are up to five times the value of the illicitly gained profits.
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2024-10-25 08:50