South Korea’s finance ministry has announced plans to implement new regulations for cross-border crypto transactions.
This is one of the latest major announcements in the country’s comprehensive approach to cryptocurrency regulation.
Starting from the second half of 2025, businesses engaging in cross-border crypto trades will be required to register with authorities. They are also required to report their transactions to the Bank of Korea monthly.
South Korea’s crypto move comes after rising crime
The new cross-border regulations come in response to alarming statistics from the customs agency. The agency revealed that virtual assets were involved in 81.3% of foreign exchange-related crimes since 2020. This came up to approximately 11 trillion won ($7.97 billion).
This move is part of South Korea’s broader regulatory framework which has changed greatly in recent years.
The country implemented the Virtual Asset User Protection Act (VAUPA) on July 19, 2024. This law mandates financial institutions to segregate users’ virtual assets from their own.
It also granted the Financial Services Commission’s (FSC) comprehensive oversight powers. Virtual Asset Service Providers (VASPs) must now maintain at least 80% of users’ assets in cold wallets to protect against hacking and system failures.
Since March 2021, all VASPs have been required to comply with stringent AML/KYC regulations. These include real-name verification for accounts.
The Special Financial Information Act, in place since 2021, has played a crucial role in regulating the crypto industry through anti-money laundering obligations.
The tax segment for cryptocurrencies remains complex in South Korea. Cryptocurrencies are not recognized as legal tender in the country. The government has also repeatedly delayed implementing a 20% tax on crypto profits exceeding 2.5 million won (around $1,800).
Initially planned for 2023, the tax has been postponed to 2028.
South Korea’s Kimchi Premium
A distinctive feature of South Korea’s crypto market is the “Kimchi Premium,” named after the country’s traditional fermented dish.
This phenomenon occurs when cryptocurrency prices on South Korean exchanges trade noticeably higher than on global markets. Premiums can sometimes reach 20–30%.
The premium results from strong local demand combined with regulatory restrictions that limit arbitrage opportunities between domestic and international markets.
In 2022, a joint public-private task force was formed by the South Korean government to develop a more robust framework. The following year, the FSC introduced VAUPA as an amendment to the Special Financial Information Act, further strengthening user protection measures.
Violations of these regulations can result in severe penalties. These can vary from fines up to five times the amount of unfairly gained profits to imprisonment, depending on the violation’s severity.
The FSC’s supervisory powers extend to inspection and enforcement actions against VASPs. These include cryptocurrency exchanges, wallet providers, and platforms specializing in digital asset services.
These new measures will take effect in 2025 and add another layer to the country’s already comprehensive regulatory framework.
Source: https://www.cryptopolitan.com/south-korea-to-regulate-cross-border-crypto/