South Korea Tightens Oversight of Cross-Border Crypto Transfers

South Korea is set to enhance its oversight of cross-border cryptocurrency transactions under a new set of rules aimed at preventing the misuse of digital assets for illegal foreign exchange activities. The Ministry of Finance and Economy announced on October 7 that it would propose a draft amendment to the enforcement decree of the Foreign Exchange Transactions Act. The amendment defines the scope, registration requirements, and reporting obligations for a newly created "virtual asset transfer business" category, which includes transfers between domestic and overseas virtual asset service providers and private wallets.

Operators of these businesses must register with the finance minister and meet specific criteria, such as securing the necessary computing systems and employing at least two individuals with experience in foreign exchange operations. Records of virtual asset transfers must be reported to the Bank of Korea and shared with other agencies, including the National Tax Service and the Korea Financial Intelligence Unit, to investigate illegal transactions.

The framework for fintech-based foreign exchange services will also be revised, merging existing small-sum overseas remittance and other specialized businesses into an "overseas payment services" category. This new category will include six business lines, with tightened entry requirements and penalties for violations, such as voice phishing and crypto-linked underground remittances. The Korea Customs Service will also see expanded inspection powers over foreign exchange transactions.

The draft decree is open for public comment until October 26 and is scheduled to take effect on December 3, aligning with the implementation of the revised Foreign Exchange Transactions Act.