South Korea intends to tighten its regulation of cross-border cryptocurrency transactions to address tax evasion and foreign exchange violations. Finance Minister Choi Sang-Mok announced these initiatives during a G20 meeting in Washington, highlighting the need for stricter regulations in this rapidly evolving sector.
New Reporting Mandates
On October 24, local news outlet Edaily reported that South Korea will require mandatory reporting from any business handling cross-border crypto transactions. Choi stated, “We will encourage proactive monitoring of virtual asset transactions used for tax evasion and currency manipulation across borders.”
Under the proposed regulations, businesses managing these transactions must pre-register with the relevant authorities and submit detailed monthly reports to the Bank of Korea. Choi pointed out that these transactions have been a “blind spot” for the nation’s tax and customs authorities. Consequently, criminals have taken advantage of enforcement loopholes to hide illicit proceeds. Data from the Korea Customs Service reveals that an overwhelming 81% of foreign exchange crimes, totaling around $1.2 billion since 2020, are associated with digital assets.
Legal Framework and Implementation Timeline
Before the government can implement these new rules, it must establish a solid legal foundation. Choi explained, “We will create new definitions for ‘virtual assets’ and ‘virtual asset business operators’ in the Foreign Exchange Transactions Act.” This new definition will categorize virtual assets as a “third type,” distinct from foreign exchange, external payment methods, or capital transactions.
The finance minister anticipates that these legal revisions will be complete by the first half of 2025. Furthermore, he expects the new reporting mandates to roll out by the second quarter.
Recent Regulatory Developments
This announcement follows South Korea’s recent introduction of regulations aimed at protecting crypto investors. The country’s Virtual Asset Protection Act came into effect on July 19. This act requires virtual asset service providers (VASPs) to adhere to stricter rules designed to safeguard user assets.
Under these regulations, virtual asset service providers (VASPs) are required to obtain insurance to protect against hacks and malicious attacks. Additionally, they must keep user assets separate from exchange tokens and maintain customer deposits in banks. VASPs are also required to regularly review token listings on exchanges to ensure compliance with the latest regulations.
In addition, South Korea intends to impose strict penalties on individuals involved in crypto-related crimes. These penalties may include jail sentences and fines that could range from three to five times the amount of profits obtained illegally.
I am Toby Rothschild, Co-Founder of Spearmint and author at Coinography, and a strategist focused on advancing Web3 innovation, digital ecosystems, and the future of decentralized technology. I combine product thinking, creative leadership, and deep interest in emerging trends to help shape how individuals and organizations interact with the next generation of digital systems.
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