South Korea to Bring Crypto Transfers Abroad Under Direct FX Oversight After Law Revision Passes Assembly

Summary

The passage of the revised Foreign Exchange Transactions Act brings overseas transfers of virtual assets and cross-border movements of stablecoins under a direct oversight framework led by the finance ministry.
Crypto exchanges and custody firms will be required to register with the finance minister when conducting virtual-asset transfer services.
Penalties for illegal foreign-exchange transactions, including payment-procedure violations, have been strengthened to as much as one year in prison or a fine of up to $72,500.

A revision to the Foreign Exchange Transactions Act containing those measures passed the National Assembly in a plenary session on May 7, Edaily reported on May 8. The bill newly defines virtual-asset transfer services and introduces mandatory registration for businesses engaged in them.

Under the revised law, transfers of assets between South Korea and overseas through the purchase, sale or exchange of virtual assets by virtual-asset operators will be classified as virtual-asset transfer services. Crypto exchanges, custody firms and other operators involved in overseas transfers will have to register with the finance minister.

The government plans to use the framework to directly monitor cross-border flows of virtual assets, including stablecoins, within the foreign-exchange authorities' supervisory system.

The system for specialized foreign-exchange businesses will also be overhauled. The current categories of money changers, small-value overseas remittance businesses and other specialized foreign-exchange businesses will be reorganized around general money-changing services and overseas payment and settlement services.

The revision also establishes grounds for revoking the registration of specialized foreign-exchange operators that exceed the scope of their approved business.

Penalties for illegal foreign-exchange transactions will be tougher. Violations of payment procedures currently carry an administrative fine of up to $36,200. Under the revised law, offenders may face up to one year in prison or a fine of as much as $72,500 if the violation is deemed intended to generate illicit gains.

Oversight of money changers that are effectively shut down will also be tightened. If a business reports its closure to tax authorities or its business registration is canceled, the finance minister will be able to revoke its registration ex officio.

Rep. Lim I-ja, chair of the National Assembly's Economic and Fiscal Planning Committee, said the measure is aimed at creating a monitoring system for virtual assets and fostering a sound foreign-exchange trading ecosystem.