South Korea is set to introduce new regulations mandating reporting for cross-border cryptocurrency transactions, aiming to combat tax evasion and foreign exchange crimes. Finance Minister Choi Sang-Mok announced these plans during a G20 meeting in Washington, emphasizing the need for preemptive oversight of crypto transactions that could be used for tax evasion or currency manipulation.
New Reporting Requirements for Cross-Border Crypto Transactions
Under the upcoming regulations, businesses involved in cross-border crypto transactions must register with authorities and submit monthly transaction details to the Bank of Korea. Currently, cross-border crypto transactions remain largely unmonitored by tax and customs agencies, creating a potential blind spot for illicit activities. The Korea Customs Service revealed that 81% of foreign exchange crimes—totaling around $1.2 billion since 2020—have involved digital assets.
Minister Choi highlighted that legal definitions for “virtual assets” and “virtual asset business operators” will be included in South Korea’s Foreign Exchange Transactions Act. This revised legislation, expected by mid-2025, will establish virtual assets as a separate category, distinct from foreign exchange and other traditional financial transactions.
Legal and Regulatory Framework for Crypto Oversight
These updates are part of South Korea’s broader efforts to enhance crypto regulations. In July, the country enacted its Virtual Asset Protection Act, imposing stricter controls on Virtual Asset Service Providers (VASPs) to safeguard user funds. This law requires VASPs to insure against cyber threats, separate user assets from exchange-owned tokens, keep customer funds in bank accounts, and consistently review the assets listed on exchanges. Additionally, individuals convicted of crypto-related crimes face harsh penalties, including jail time and fines three to five times the amount of illicit gains.
Looking Ahead: Strengthening Oversight and Investor Protection
South Korea’s approach underscores a trend toward more comprehensive crypto regulations as authorities work to close regulatory gaps and deter financial crime. By requiring transparency for cross-border transactions, the country aims to curb illegal activities and increase accountability within the rapidly growing crypto market.
