South Korea is set to step up its surveillance of crypto transactions across its borders. According to Choi Sang-Mok, the country’s finance Minister, the government aims to crack down on tax evasion and foreign exchange crimes.
He shared these plans while speaking at a recent G20 meeting in Washington. To do this, South Korea will require all businesses dealing with cross-border crypto transactions to report them.
Local News outlet Edaily reported this new mandate on October 24.
South Korea Takes Action: New Rules to Monitor Cross-Border Crypto Transactions
Choi said that the South Korean Government plans to closely monitor crypto transactions that may be used for tax evasion and currency manipulation across borders.
Under these new rules, businesses handling cross-border crypto transfers will need to take extra steps to pre-register with the correct authorities.
Additionally, the Bank of Korea requires them to report all transaction details to it each month. Choi explained that cross-border crypto transactions are now a “blind spot” for South Korea’s tax and customs services.
Unfortunately, criminals can take advantage of this gap. They might use it to hide illegal money or carry out unlawful transactions. Since authorities carry out enforcement on a case-by-case basis, it’s easier for them to avoid detection.
Also, the Korea Customs Service reported that most foreign exchange crimes involve digital assets. Since 2020, authorities have linked about 81% of these crimes, or roughly $1.2 billion, to crypto.
However, the government needs a solid legal foundation before any new rules can take effect. This means they must create clear laws to support and enforce these new measures.
Choi stated that South Korea plans to set new definitions for “virtual assets” and “virtual asset business operators” in its Foreign Exchange Transactions Act.
With these definitions, virtual assets will be classified separately. They will be seen as a “third type” of asset. This means they won’t be grouped with foreign exchange, external payment methods, or capital transactions.
Also, the finance minister shared that he expects the policy-makers to complete the legal changes by mid-2025. The new reporting rules should be in place by the second quarter of that year.
South Korea Launches Tough New Laws to Shield Investors
Meanwhile, South Korea has also recently launched many new rules to protect people who invest in crypto. These changes aim to make the crypto market safer for everyone.
The country’s Virtual Asset Protection Act went into effect on July 19. This law requires virtual asset service providers (VASPs) to follow stricter rules.
VASPs are companies that help people buy, sell, or trade digital assets like cryptocurrencies. Under the new law, these companies must better protect user assets.
This means they need to improve their security measures and keep investors’ money safe.
The new laws require VASPs to get insurance to protect against hacks and other attacks. If hackers attack a company, the insurance will cover its losses.
Additionally, the rules say that VASPs must keep user assets separate from their own tokens. This helps ensure that user funds are safe even if the company faces problems.
Furthermore, VASPs must hold customer deposits in banks, which adds another layer of security. The new laws also require VASPs to review the tokens they list on their exchanges regularly to ensure their legitimacy.
To tackle crypto crime, South Korea will also enforce strict penalties for offenders. Those who commit crypto-related crimes will face jail time. They may also have to pay fines three to five times the amount they illegally gained.
