South Korea’s Finance Minister Choi Sang-Mok announced plans to introduce mandatory reporting of cross-border crypto transactions to combat financial crimes related to foreign exchange. This move aims to enhance surveillance of crypto transactions and prevent tax evasion.
New Mandate for Cross-Border Crypto Transactions
According to an October 24 report by Korean news portal Edaily, Choi stated at a G20 meeting in Washington that South Korea will require all businesses conducting cross-border crypto transactions to report them. “We will support proactive monitoring of crypto transactions used for tax evasion and cross-border currency manipulation,” explained Choi.
Businesses handling these transactions will need to register with the relevant authorities and provide detailed monthly reports to the Bank of Korea.
Cross-Border Transactions as a Tax ‘Blind Spot’
Choi noted that cross-border crypto transactions remain a “blind spot” for South Korea’s tax and customs authorities, allowing criminals to conceal illegal revenues and conduct unauthorized transactions. The Korean Customs Service estimates that 81% of foreign exchange-related crimes – roughly $1.2 billion since 2020 – involve digital assets.
New Definitions and Legal Framework for Virtual Assets
To implement these new regulations, a solid legal foundation will be required. Choi stated that the Foreign Exchange Transactions Act will include new definitions of “virtual assets” and “virtual asset operators.” Virtual assets will be defined as a “third type” that falls outside foreign exchange funds or capital transactions. These legal revisions are expected to be completed in the first half of 2025, with new reporting mandates set for the second quarter.
Further Measures to Protect Crypto Investors
South Korea has already introduced new regulations to protect crypto investors. On July 19, the Virtual Asset Protection Act took effect, requiring virtual asset service providers (VASPs) to adhere to stricter rules to safeguard users’ assets. These regulations include insurance coverage against cyberattacks and the requirement to keep users’ assets separate from the platform’s funds.
Strict Penalties for Crypto Crimes
South Korea will also impose strict penalties for crypto-related crimes, including imprisonment and fines of up to five times the illegally obtained profits.
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