Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Korea to mandate reporting cross-border stablecoin transfers to curb financial crimes
Finance Minister Choi Sang-mok, second from right, speaks to reporters during the G20 Finance Ministers' meeting in Washington, Friday (local time). Courtesy of Ministry of Economy and Finance
By Lee Yeon-woo
Korea will mandate the reporting of cross-border stablecoin transactions by late next year, Finance Minister Choi Sang-mok said Friday, aiming to prevent illicit activities such as tax evasion.
"As the number of stablecoins like Tether increases, cross-border transactions using stablecoins have also been on the rise," Choi told reporters during the Group of 20 Finance Ministers and Central Bank Governors Meeting in Washington.
"We plan to require virtual asset providers to register in advance and mandate the regular reporting of cross-border transaction details to the Bank of Korea (BOK)."
Stablecoins are virtual assets pegged to the U.S. dollar at a 1:1 ratio. Leveraging blockchain technology, they enable fast and convenient transfers while offering lower price volatility compared to other cryptocurrencies. They have recently gained popularity for trade settlements in cross-border transactions, functioning like foreign exchange.
However, stablecoins have also faced criticism for being misused in illegal foreign exchange activities, such as corporate tax evasion and money laundering for drugs and gambling.
Korea Customs Service (KCS) data showed that, from 2020 to July 2023, virtual asset-related crimes accounted for 9 trillion won out ($6.4 billion) of the 11 trillion won detected in foreign exchange violations.
In response, the government plans to amend the Foreign Exchange Transactions Act in the first half of next year. Virtual assets will be classified as a third category, distinct from foreign exchange, external payment instruments and capital transactions.
Once the provision is established in the second half of next year, businesses such as virtual asset exchanges must register in advance to handle cross-border virtual asset transactions. They will also be mandated to report the details to the BOK on a monthly basis.
The reports are expected to include information such as the transaction date, amount, type of virtual asset and identifying details of both the sender and receiver. The data may later be shared with the National Tax Service, the KCS and the Financial Supervisory Service to monitor illegal activities and conduct analytical assessments.
Choi emphasized that, even though there is still no legal consensus on the nature of virtual assets or how to regulate them, proper oversight is necessary due to their potential misuse in illegal ways.
However, Choi drew a line regarding virtual asset institutionalization, adding, "Establishing a monitoring system is different from recognizing institutionalization."
He added, "Whether to institutionalize virtual assets will be thoroughly discussed by the virtual asset committee, which will be launched under the leadership of the Financial Services Commission in November."