South Korea to end crypto purchases via credit cards
The Financial Services Commission (FSC) of South Korea has proposed an amendment to the country’s credit finance act that reportedly prevents citizens from buying cryptocurrencies using credit cards, particularly on foreign exchanges.
The FSC’s proposal stems from growing concerns about the illegal outflow of domestic funds, money laundering activities, and speculative behavior associated with cryptocurrency transactions. The regulatory body aims to limit the exposure of its citizens to the risks involved in buying cryptocurrencies from abroad.
In a legislative notice dated January 3, the FSC highlighted these concerns and announced the start of a public feedback period on the proposed amendment, which will last until February 13. The regulatory body expects the amendment to be reviewed, voted on, and then implemented in the first half.
This move follows a 2021 amendment to the financial reporting law in South Korea, which mandates that cryptocurrency users trade using accounts on local exchanges that are verified with their real names. Additionally, local trading platforms are required to undergo rigorous licensing processes to offer fiat-to-crypto services, including securing partnerships with local banks.
Upon completing real-name verification and partnering with a local bank, digital assets platforms are required to acquire a license from the country’s Financial Intelligence Unit (FIU).
Currently, South Korean laws only allow transactions between digital assets through deposit and withdrawal accounts where the user’s identity can be verified. However, these regulations do not extend to foreign crypto exchanges. The new amendment aims to bridge this gap and provide more oversight of crypto transactions involving South Korean citizens.
Historically, South Korea is one of the hottest investing and trading markets for cryptocurrencies. However, authorities have been hesitant to regulate the virtual asset class, due to their belief that cryptocurrency regulation could lend legitimacy to the sector.
Separately, the central bank is taking a ‘wait-and-see’ approach over the issue of a government-controlled cryptocurrency, or a so-called central bank digital currency (CBDC), as of now.
