By
Chimamanda U. Martha
March 11th, 2024
South Korea is the first Asian country to make efforts to ensure transparency among all crypto holders in the nation, irrespective of their class and status.
On January 4, 2024, South Korean financial authorities proposed a ban on using credit cards for crypto payments in the country.
The country’s top financial regulator, the Financial Services Commission (FSC), published a legislative notice on Thursday seeking to amend the Enforcement Decree of the Credit-Specialized Financial Business Act. The amendment aims to introduce a new clause in the existing law that would restrict people in the region from using their credit cards for any transactions associated with digital assets.
South Korea Plans Credit Card Restrictions for Crypto
The financial authorities said that concerns had been raised about illegal outflows of domestic funds outside the Asian country.
According to the FSC, South Korean nationals use their cards on international crypto exchanges for illegal activities, including money laundering, speculation, and encouragement of speculative activities. For this reason, the authorities want to restrict the use of credit cards for any payment related to crypto.
In its legislative notice, the financial watchdog also said it aims to work with foreign exchanges in the future to tackle the illicit activities associated with credit card payments.
The Enforcement Decree of the Credit-Specialized Financial Business Act currently applies to local exchanges, requiring them to process crypto transactions only for users depositing or withdrawing funds from the platforms.
The legislation also requires users to comply with the anti-money laundering (AML) and know-your-customer (KYC) rules before accessing any of the local authorized crypto exchanges. However, when it comes to foreign exchanges based outside the shores of South Korea, the law becomes void.
Invited to Comment on Proposed Amendment
In addition to curbing illegal activities linked to credit card usage for cryptocurrencies, the FSC aims to diversify funding methods for credit finance companies.
The authorities will also look into resolving arbitrage related to the limit on providing economic benefits when recruiting new credit cards. The FSA explained that under the current law, the limit on economic benefits that can be provided when recruiting new credit cards is set differently: up to 100% of the annual fee online and up to 10% offline. However, the proposed amendments aim to resolve these differences.
The financial regulator has called on the public to submit their opinions regarding the proposed amendments. South Korean nationals, including corporate institutions in the country, have until February 13, 2024, to respond to the amendment with their feedback.
According to local news media, after submission, the proposed amendment will go through a review and resolution process before passing to lawmakers for voting and eventually being implemented into law in the first half of 2024.
Crypto Transparency Mandate for South Koreans
Meanwhile, South Korea is the first Asian country to make efforts to ensure transparency among all crypto holders in the nation, irrespective of their class and status.
In December 2023, the country’s Ministry of Personnel Management announced that all elected government officials, employees, and other public officers must fully disclose their crypto holdings.
The move is part of the country’s public ethics and the transparency initiative program that tracks property registration and reviews for public service members.