South Korea plans on including fintech companies in the new licensing framework for virtual asset transfers, which is due to be introduced in December. This follows the introduction of a six-month grace period into the Foreign Exchange Transactions Act amendment.
The concerned government made this announcement to the local media. The South Korean government approved and passed the revised law on June 2 following cabinet approval. Under the new regulations, companies conducting cross-border transfers through virtual assets must register with the Ministry of Economy and Finance and report their transactions through South Korea’s foreign exchange reporting system.
Authorities created this regulatory framework to bring crypto-based cross-border transfers under formal regulatory supervision. This is because officials had found that many digital asset transfers were operating outside the foreign exchange surveillance framework and were therefore posing risks of money laundering and crime.
Fintech Firms May Receive Access to Expanding Market
Current VASP rules primarily limit access to cryptocurrency exchanges and certain registered custodial entities. In this regard, many industry players anticipated that the leading cryptocurrency exchanges like Upbit and Bithumb would prevail within the new licensing system.
But now South Korean regulators are planning to extend the scope of eligible parties to include non-traditional crypto exchanges. According to an official from the Bank of Korea, there is no need for regulators to restrict virtual asset transfer services to the traditional VASPs alone if some other entities can efficiently perform such transfers. In addition, authorities are still analyzing the licensing and compliance process for potential applicants.
South Korea Continues Strengthening Digital Asset Oversight
The Ministry of Economy and Finance and the Bank of Korea continue collaborating with industry stakeholders to finalize the framework’s implementation rules before its December launch. Market watchers are also on high alert to see whether the final enforcement decree would include provisions that would widen the pool of participants beyond cryptocurrency exchanges to enable fintech firms to enter the cross-border virtual asset transfer market.
The framework comes at a time when South Korea is attempting to create regulatory rules for blockchain-based financial products. Regulators recently indicated that tokenized stocks could face securities taxes if authorities classify them as securities. The Financial Services Commission has announced that it will publish new tokenized securities rules in July.
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