South Korea has begun considering rules that could allow fintech firms, not just cryptocurrency exchanges, to participate in a new licensing regime for cross-border digital asset transfers scheduled to take effect in December.
Summary
- South Korea is considering allowing fintech firms to join a new virtual asset transfer licensing regime set to take effect in December.
- Companies approved under the framework will be able to offer blockchain based cross border remittance and foreign exchange services under formal regulatory oversight.
Officials from relevant government agencies and industry participants told local media that authorities have started drafting enforcement regulations for amendments to the Foreign Exchange Transactions Act and are reviewing registration requirements for businesses seeking to operate virtual asset transfer services.
The South Korean government promulgated the revised law on June 2 after cabinet approval. The legislation includes a six-month grace period and will take effect in December.
Under the new framework, cross-border transfers involving virtual assets will become a regulated foreign exchange activity. Companies that wish to provide such services must register with the Ministry of Economy and Finance and report overseas transfer transactions through the Bank of Korea’s foreign exchange reporting network.
Authorities have argued that cross-border cryptocurrency transactions previously operated outside the country’s foreign exchange oversight system, creating risks related to illicit foreign exchange activity and money laundering. The revised framework brings those transactions under formal supervision and reporting requirements.
The law requires applicants to complete Virtual Asset Service Provider registration, connect their systems to institutions responsible for relaying foreign exchange and digital asset transaction information, and satisfy additional requirements related to facilities and professional personnel that will be defined by presidential decree.
Current VASP rules limit eligible firms largely to cryptocurrency exchanges and certain custodians registered with the Financial Intelligence Unit under the Financial Services Commission. Industry participants had therefore expected the new regime to be dominated by major domestic exchanges such as Upbit and Bithumb.
Fintech firms could gain access to the market
Government officials are also reviewing whether registration should extend beyond exchanges to fintech companies capable of handling cross-border virtual asset transfers.
A Bank of Korea official told local media that authorities do not necessarily need to restrict the business to existing VASPs if other entities can perform transfer services. The official added that businesses seeking to engage in virtual asset transfer activities may still need foreign exchange-related registration under applicable regulations.
The Bank of Korea said it has been holding meetings with industry participants and providing guidance on registration requirements and integration with the foreign exchange reporting system.
Industry attention has increasingly focused on whether the final enforcement decree will open the sector to new entrants beyond traditional cryptocurrency trading platforms.
Many fintech firms have faced obstacles entering the digital asset market because of VASP registration requirements and difficulties securing real-name banking relationships. Industry participants believe a separate licensing framework for virtual asset transfers could create opportunities in blockchain-based remittances and foreign exchange services.
The Ministry of Economy and Finance and the Bank of Korea are continuing consultations with industry participants as they finalize detailed rules ahead of the December launch of the virtual asset transfer licensing regime.
South Korea expands digital asset oversight
The latest regulatory initiative follows recent efforts by South Korean authorities to define how blockchain-based financial products fit within existing financial rules.
Earlier this month, the Ministry of Economy and Finance said tokenized stocks could be taxed under existing securities regulations if the Financial Services Commission formally classifies them as securities. Officials stated that the legal treatment of an asset should depend on its economic characteristics rather than the technology used to issue it.
The Financial Services Commission is expected to release updated token securities guidelines in July as it continues work on a roadmap covering tokenized versions of conventional financial assets, including listed equities.
