Korea’s exchanges will be required to hand over crypto transaction data to tax and financial regulators

What’s new? South Korea plans to strengthen regulation of cross-border transactions using cryptocurrencies to fight crime. According to Minister of Economy and Finance Choi Sang-mok at the G20 meeting in Washington, D.C., crypto firms providing services for cross-border transfers of stablecoins and other cryptocurrencies must register and report such transactions to the central bank monthly.

Material by The Block

What else is known? The submitted transaction data will be tracked by tax, customs, and financial Korean and global regulators to identify illegal transactions and use them for research purposes.

According to authorities, about 88% of currency crimes totaling 1,65 trillion Korean won ($1,2 billion) in Korea were related to cryptocurrencies. Such crimes include illegal arbitrage and money laundering.

To create a legal basis for the innovation, the Finance Ministry will amend the Foreign Exchange Transactions Act to add the definitions of “virtual assets” and “virtual asset business operators” in a new category separate from foreign exchange, cross-border payments, or capital transactions.

The Minister expects the legislative changes to be finalized by the first half of 2025, with the reporting and monitoring system to be officially launched in the second half of the year.

Thus, South Korea continues to work on creating a comprehensive regulatory framework for cryptocurrencies. The first set of rules aimed at protecting investors came into force in July this year.

The Crypto Investor Protection Act aims to combat insider trading and market manipulation. It requires exchanges to keep at least 80% of customer deposits in a segregated cold wallet, to deposit their cash with licensed local banks, and to have a reserve fund in case of liquidity crisis or hacking. It also requires them to maintain cryptocurrency reserves equal in size and type to customer deposits.

In addition, South Korea’s Financial Supervisory Service (FSS) launched a real-time monitoring system for crypto exchanges to track fraudulent activities.