The South Korean government plans to extend foreign exchange regulations to cross-border transactions, including dollar-pegged stablecoins.
The Ministry of Economy and Finance announced today that it is considering measures to ensure the stability of stablecoin transactions.
The ministry noted that beyond its role in the cryptocurrency ecosystem, stablecoins are increasingly used for cross-border transactions, and their global transfer capabilities may require different rules. .
South Korea’s Financial Services Commission (FSS) plans to prioritize the regulation of stablecoins in the next phase of the country’s Virtual Asset User Protection Act. The FSS plans to consult with international regulators, including Japan and the European Union, but no specific schedule for the discussions has been set.
Regulations will begin by establishing a legal framework for issuing stablecoins pegged to the Korean won. If enacted, similar rules will be created for stablecoins tied to foreign currencies.
South Korea’s right-wing political party has proposed postponing taxation on cryptocurrency profits for three years. If passed, the country’s tax on crypto profits would be delayed from early 2025 to 2028.
The 20% tax on crypto profits was originally scheduled to take effect on January 1, 2022, but due to intense backlash from investors and industry experts, it has been postponed twice and will be implemented in January 2025. It has been postponed to the 1st.
President Yoon Seok-yeol said it would be inconsistent to impose a tax without a clear basis on how cryptocurrencies are legally defined in the national system. Therefore, it is better to postpone taxation until the cryptocurrency market matures and new laws are thoroughly prepared to ensure transparency and investor protection.
Japan introduced its own stablecoin regulations in response to Terra’s bankruptcy in 2022, initially prohibiting issuance by institutions other than banks, but lifted the regulations in 2023. Meanwhile, the European Union’s crypto market regulations that came into effect in June led to the delisting of non-compliant stablecoins from cryptocurrency exchanges.
South Korea also strengthened its cryptocurrency regulations with the Virtual Asset Protection Act, which took effect on July 19th. The law requires virtual asset service providers (VASPs) to carry insurance against cyber-attacks and take strict measures such as segregating users’ funds from their funds. Exchange assets and maintain customer deposits in banks. It also requires regular reviews of exchanges’ token lists.
Violation of these regulations carries severe penalties, including prison terms and fines of three to five times the illegally obtained profits.
