South Korea Cryptocurrency Laws Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology
Starting in January 2018, the South Korean government sought to regulate cryptocurrency trading by restricting trading only from real-name back accounts. In short, a cryptocurrency trader was required to have an account with a bank to engage in trading. This was to allow banks to verify the identity of the trader and restrict criminal and money laundering activities. Further, foreigners and minors were not allowed to trade cryptocurrencies.
In February 2018, Choe Heung-sik, chief of South Korea’s Financial Supervisory Service, noted that the South Korean government would support normal cryptocurrency trading and pushed for financial institutions to facilitate transactions with cryptocurrency exchanges.
Notably, on March 5, 2020, South Korea passed an amendment to the Act on the Reporting and Use of Specific Financial Transaction Information (the “March 2020 Amendment”), which will go into effect in March 2021. The legislation provides a regulatory framework for cryptocurrencies and related services and activities, officially legalizing cryptocurrency in South Korea and mandating certain compliance measures.
The March 2020 Amendment requires all Korean virtual asset service providers to do the following:
Register an authorized bank account (in line with the 2018 provisions) and provide customers with real-name bank accounts held at the same bank;
Acquire an Information Security Management System (“ISMS”) certification from the Korea Internet Security Agency (“KISA”);
Provide all company details and bank account details to the Korea Financial Intelligence Unit (“KoFIU”); and
Implement expanded Anti-Money Laundering/Know Your Customer (“AML-KYC”) procedures.
South Korea’s Ministry of Economy and Finance is continuing to work through and advocate for amendments to the tax code to allow the taxation of cryptocurrency.
P.S. Insights on Cryptocurrency Legal Issues
Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.
Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.
However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.
Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency. The globe below provides links to country-by-country summaries: