South Korea’s government plans to apply foreign exchange rules to cross-border transactions involving dollar-pegged stablecoins.
On Oct. 8, the country’s Ministry of Economy and Finance reportedly announced that it was reviewing measures to ensure the soundness of stablecoin transactions.
The government agency said that apart from being used to transact and exchange within the crypto ecosystem, stablecoins are also used in cross-border transactions. This means that stablecoin’s functions expand to global transfers, which might require different rules.
Bitcoin conference and a bad trip to North Korea. Source Cointelegraph
Consulting with other jurisdictions
Furthermore, the Financial Services Commission (FSS), South Korea’s top financial regulator, will also prioritize and discuss stablecoins in the second legislative stage of the country’s Virtual Asset User Protection Act.
The FSS reportedly plans to consult with other regulators in other jurisdictions, including Japan and the European Union. Despite the statement, the government agency did not provide a specific consultation timeline.
Stablecoin regulations will also reportedly begin with a system for issuing won-pegged tokens. This means a legal system for won-pegged stablecoins will first be established and then applied to foreign currency stablecoins.
In 2022, the Japanese government issued new rules on stablecoins after the Terra collapse. On June 3, 2022, Japan banned stablecoin issuance by non-banking institutions. However, the jurisdiction lifted the ban in 2023.
Meanwhile, the European Union’s Markets in Crypto-Assets Regulation also came into force in June, leading crypto exchanges to delist non-compliant stablecoins.
South Korea tightens crypto regulations
South Korea has recently tightened its measures by enforcing laws to protect crypto users. On July 19, its Virtual Asset Protection Act came into effect, compelling virtual asset service providers (VASPs) in the country to maintain stricter measures to protect user assets.
The laws require VASPs to take out insurance against hacks and malicious attacks. It also mandates providers to keep user assets separate from exchange tokens while keeping customer deposits in banks. The law also includes regularly reviewing token listings on exchanges.
The South Korean government will also impose severe punishments on violators. This includes jail sentences and fines of three to five times the amount of illegally acquired profits.
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