South Korea's Ministry of Economy and Finance issued advance notice of legislation for a proposed amendment to the Enforcement Decree of the Foreign Exchange Transactions Act. The amendment would require cross-border virtual asset transfers to be reported through the foreign exchange transaction network. Key measures include expanding the scope of application, strengthening sanctions for violations, and reviewing the transaction framework for the fintech sector.
Details of virtual asset transfers to and from South Korea will be reported to the Bank of Korea's foreign exchange data network and shared with the National Tax Service, Korea Customs Service, Financial Supervisory Service and FIU, among others, strengthening monitoring of illegal foreign exchange transactions and illicit currency exchange. The proposed amendment was submitted as a follow-up measure to the Foreign Exchange Transactions Act and is intended to specify matters delegated by the Act.
The scope of the newly established virtual asset transfer services will cover not only transfers between domestic and overseas virtual asset service providers, but also transfers between domestic service providers and individual wallets. The focus is on incorporating cross-border virtual asset movements into the authorities' monitoring framework. Service providers will be required to secure at least 2 personnel who meet requirements for the necessary facilities, experience and training, as well as to register in advance and notify the authorities of transfer details.
Money changers will be subject to new capital requirements and entry and exit requirements, including measures to prevent the appointment of disqualified officers. The maximum penalty for violations will be substantially increased to as much as 100% of profits. Expansion of the scope of the one-strike-out rule and cancellation of registration for serious violations are also under consideration.
The reorganization of the foreign exchange business framework for fintech will establish a new industry structure centered on cross-border payment and settlement services. The Financial Supervisory Service and the Financial Services Commission will jointly conduct inspections and supervision. Following a public comment period through the end of this month, the Enforcement Decree is intended to take effect after its amendment on 3 December next year.