Crypto Regulations in South Korea 2024

The post Crypto Regulations in South Korea 2024 appeared first on Coinpedia Fintech News

South Korea, officially the Republic of Korea, is an East Asian country with a population of nearly 52 million. It uses the South Korean won as its currency. The country has become a major player in adopting blockchain and cryptocurrencies, which has led to increased public scrutiny.

To ensure the safe and secure operation of the cryptocurrency market, South Korea has implemented stringent regulations. The Financial Services Commission (FSC) enforces strict Anti-Money Laundering and securities regulations for cryptocurrencies like Bitcoin (BTC).

Known for early adoption of new technologies, South Korea embraced micropayments and digital tokens as early as 1996. This familiarity has made cryptocurrencies a common asset and payment method. Many young people have successfully traded cryptocurrencies to make money.

South Korean Crypto Regulations 2024

25-06-2024 : South Korea Introduces New Virtual Asset Regulation

Enacted on July 18, 2023, and taking effect from July 19, 2024, the Virtual Asset User Protection Act safeguards crypto investors and regulates South Korea’s virtual asset market. It tackles unfair trading practices and introduces critical protections, representing a milestone in industry regulation.

05-04-2024 : South Korea Enforces Stricter Regulations for Crypto Exchange Listings

South Korean financial authorities released new guidelines imposing tighter regulations for token listings on centralized crypto exchanges by the end of April or early May.

20-03-2024 : Montenegrin Court Denies Do Kwon’s Appeal Against Extradition to South Korea

Montenegro’s court rejected an appeal from Terraform Labs co-founder Do Kwon, allowing his extradition to South Korea. The Appellate Court upheld a decision from the country’s high court on March 20. Kwon faces potential criminal charges in South Korea.

05-02-2024: South Korea’s Regulator Plans Discussion on Spot Bitcoin ETF with SEC Chief Gary Gensler

Lee Bok-hyun, the head of South Korea’s Financial Supervisory Service (FSS), mentioned that he planned to maintain talks with the U.S. Securities and Exchange Commission (SEC). One area of focus was reported to be spot bitcoin exchange-traded funds (ETFs), as per Hankyung’s report.

03-01-2024 : Proposal in South Korea to Ban Credit Card Payments for Cryptocurrencies

South Korea’s top financial regulator proposed changing the country’s credit finance laws to prevent local citizens from buying cryptocurrency with credit cards. In a legislative notice dated January 3, the Financial Services Commission (FSC) cited concerns about illegal outflows and money laundering associated with South Korean citizens purchasing cryptocurrency from foreign exchanges.

Government stance on cryptocurrency 

South Korea authorizes cryptocurrency ownership and trading. South Korea passed an amendment to the Act on the reporting and use of specific Financial Transactional Information which came into existence in the year of  2021 and extended AML/CTF rules to virtual service providers.

The Law introduced covers virtual asset service providers (VASP) activity, involving buying and selling of cryptocurrency, crypto-to-crypto exchanges, transferring of crypto, and storage/management of virtual assets. As a result, all Crypto Service Providers now have to transform their AML/KYC systems and register with Korean financial regulators before starting any crypto activity.  

Crypto Taxation

Currently, the virtual assets tax in South Korea is decided to be postponed with the support of young voters and is planned to tax virtual assets until 2023 by South Korean legislators. Starting Jan 1, 2022, the tax proposed to levy a 20% tax on crypto gains over a period of one year, KRW 2.5 million(US$2,122).

Crypto tax plans in South Korea have not just been rejected by young investors and industries, but also the lawmakers and financial authorities are not accepting the crypto tax plan in the country due to which the plans are getting postponed.

Stock investors are supposed to pay tax for the gains above KRW 50 million (US$42,450), whereas crypto investors have to pay the tax once they reach a Capital gain of $2,122. Further Investors over stock losses can be carried over for five years but crypto losses are not allowed to do the same.   

Crypto Mining 

South Korea stands as the major crypto miners hub where miners are benefited from a significant tax break under the digital currency tax regime 2022 regulation. Crypto miners can deduct electricity costs as business expenses during the tax filing of crypto.

According to the new law implemented by South Korea’s Ministry of Economy and Finance, a provision is added to crypto miners to report operating expenses as tax deductibles, which also covers electricity bills with the proof of electricity used.

There found an increase in importing mining hardware via a country’s popular air terminal Incheon. The market value of less than $150 for  crypto mining hardware is considered for personal use in South Korea. 

Historical Events and Announcements

2023

25-05-2023: South Korea Enacts Law Requiring Officials to Disclose Bitcoin Holdings

The Kim Nam-guk Prevention Law was enacted due to a scandal involving National Assembly members moving crypto. South Korea passed new laws mandating officials to report holdings of cryptocurrencies like Bitcoin. The National Assembly unanimously approved the bill during a May 25 plenary session.

17-05-2023 : South Korean Prime Minister Urges High-Ranking Officials to Disclose Crypto Holdings

South Korean Prime Minister Han Deok-soo urged high-ranking officials to disclose and register cryptocurrency assets, reported a local news outlet. In a press conference at the Sejong Government Complex on May 17, he emphasized including crypto assets in officials’ property registration.

2022

01-04-2022: South Korean Banks looking for permission to use cryptocurrency.

The Korean Federation of Banks (KFB) may ask South Korea’s future presidential government to license local banks that service cryptocurrency. Banks should be allowed to explore virtual asset companies, such as crypto trading platforms, e-wallets, and custody services according to KFB.

10-03-2022: Upcoming President vows to reverse Crypto crackdown and delegulate sector.

South Korea’s next president vows to reverse the crypto crackdown and deregulate the sector Yoon Suk-yeol, the former prosecutor general of South Korea recently pledged to delegulate crypto assets, a narrow victory secured on Thursday in the country’s presidential election.

26-03-2022: South Korea restricts crypto transfers higher than $821 to user-verified wallets.

Korean exchanges will flag crypto transfers worth more than $821, transfers more than $821 will be restricted to user-verified wallets, with a select number of exchanges adopting the Anti-Money Laundering System (AML).

28-02-2022: LABEL Foundation proves a light at the end of the tunnel for crypto.

LABEL a seemingly unparalleled NFT infrastructure constructed atop the Ethereum Network and powered by the LBL utility and governance token. Obtaining a listing on South Korean exchanges has become tedious and difficult because of rigorous restrictions and high-level supervision from financial watchdogs.

08-01-2022: South Korean crypto exchanges follow Coinone in verifying private wallets.

South Korean exchanges want their users to verify third-party wallet addresses to help the country comply with FATF travel rule guidelines. major crypto exchanges in South Korea such as Upbit, Bithumb, and korbit, follows Coinone’s lead in banning transfers to non-verified wallets.

2021

10-12-2021: South Korean regulator proposes new strict rules for token issuers. The FSC wants to establish a system that would recover illegally gained funds, dole out criminal punishments, and protect investors from future malfeasance. South Korea’s Financial Services Commission (FSC) has issued a report outlining its new definition of cryptocurrencies.

25-11-2021: Korbit is the first crypto exchange to add support for Shiba Inu in Korea, a country known for its strict crypto regulations. The platform will allow its customers to trade Shiba Inu with the Korean Won.

05-10-2021: Enforcement Decree of the Act on the reporting and use of specific financial transaction information. The purpose of the decree is to prescribe the matters delegated by the Act on reporting and using specified Financial Transaction Information and other matters necessary for enforcement.

19-09-2021: South Korean Crypto exchange backed by DOGco is facing potential closure ahead of the country’s fast-approaching deadline for platforms to submit their requests for an operating license officially.

2020

25-07-2020 South Korean banks to decentralize data security, South Korean banks are taking steps to bring cybersecurity to a new level by keeping up with fintech and addressing new threats arising from their interactions with the crypto space. Many Institutions are adopting unprecedented measures including the integration of blockchain technologies. 

01-04-2020:- Binance entered the South Korean market and started its operation.

07-03-2020:- The South Korean Parliament unanimously passed the amendment to the Act on Reporting and Use of Specific Financial Information. As per the new Act, Crypto service providers are required to use the real-name verification system and comply with the global cryptocurrency standard set by the Financial Action Task Force(FATF). The Asian news reported that cryptocurrencies are legal in Korea. It elaborated as, 

“The passing of the amendment signifies the official entry of cryptocurrency trading and holding into the legal system for the South Korean government.”

2019

19-12-2019:- South Korea’s biggest telecom company, KT, announced local blockchain-based currency for the largest city Busan. It will go live on 30-Dec-2019. Yoo Yong-Gyu, KT’s business center head for blockchain told, “With our know-how of operating a regional currency and blockchain security, KT will work towards establishing Dongbaek Currency and contributing to the growth of Busan’s economy.”

02-08-2019:- Busan city has been declared as a ‘Regulation-free’ zone for blockchain development. A total of eleven regulations were lifted and about $25 million investment is expected by 2021. BNK Busan bank will be supervising the project. However, ICO’s will still remain under regulations for not operating in Korea.

12-04-2019:- The South Korean lawmakers announced their interest to reconsider the regulatory policy which has affected cryptocurrency firms in the country. During the Deconomy Conference, the lawmakers showcased their intentions

30-01-2019:- The FSC, in a press release, said it would continue with its 2017 ban on the funds raised through ICO’s. A survey was conducted with 22 companies and the takeaways of the survey were,

• Investments on ICO’s are still risky with fewer returns
• Companies based out of Korea are operating in more favorable jurisdictions and raising funds from domestic Korean investors.
• There is still a lack of data and information that would help the investors to invest.

2018

22-10-2018:- The FSC issued a warning to the investors regarding the risks involved in investing in cryptocurrencies. 

13-07-2018:- The South Korean Ministry of Strategy and Finance announced a government plan for reduced tax obligations for blockchain companies.

15-06-2018:- The Bank of Korea released a research report called ‘Payment and Settlement Research Report 2017’. These were the research reports related to Blockchain technology and cryptocurrencies.

08-03-2018:- The Korean Financial Service Commission (FSC) clearly stated that it has no plans to uplift the ban on ICO’s and regulate it. But I would consider it in the future. 

2017

06-12-2017:- FSC issued a ban on the trading of Bitcoin Futures which led to the withdrawal of a seminar scheduled in December 2017 for the Bitcoin Futures investors. The government said that it has no plans to ban bitcoin exchanges but the ICO’s will remain subject to the ban.

29-09-2017:- South Korea’s Financial regulators said it would ban raising money through virtual currencies called the ICO’s. The regulator after meeting with the finance ministry, the Bank of Korea and the National Tax service said, “Raising funds through ICOs seems to be on the rise globally, and our assessment is that ICOs are increasing in South Korea as well.”

02-08-2017:- A lawmaker in South Korea emphasizes the need for regulations on digital currency. The proposal to amend the existing Electronic Financial Transaction Act was proposed by Park Yong-Jin, a representative of the Democratic Party. 

18-11-2016:- Financial Regulators of South Korea launched a new Digital Task Force to introduce new regulations for the exchanges.

10-12-2013:- Ministry of Strategy and Finance, Bank of Korea, Financial Service Commission, and Financial Services Commission jointly said that ‘cryptocurrency’ is not a legal currency. They do not meet the regulatory standards set by the government. Also warned about the intrinsic value of Bitcoin.

Conclusion

South Korea is one of the top 10 adopters of Virtual currency, regulating cryptocurrency has been brewing in South Korea for a while. Before anyone starts, crypto exchanges in the country must be licensed by the Financial Intelligence Unit(FIU), and also possess partnerships with banks to continue the services.

The four biggest Crypto exchanges such as UPbit, Bithumb, Coinone, and Korbit have real-name bank accounts issued by commercial banks and are responsible for 97% of trading volumes recorded in South Korea.

With the broad definition of crypto assets, it’ll be interesting to see if South Korean regulators will approve a clear regulatory framework that clarifies and categorizes cryptocurrencies and other digital assets, like non-fungible tokens.