South Korea Targets Cross-Border Stablecoin Transactions

The Financial Services Commission of South Korea intends to confer with the EU and Japan over stablecoin regulations.

The government of South Korea intends to enforce foreign exchange regulations on international transactions employing stablecoins tied to the dollar.

The Ministry of Economy and Finance of the nation allegedly declared on October 8 that it was examining steps to guarantee the stability of stablecoin transactions.

According to the government agency, stablecoins are utilized in cross-border transactions in addition to being used for trade and transactions within the cryptocurrency ecosystem. This implies that the capabilities of stablecoins extend to international transfers, necessitating new regulations.

Collaborating with other authorities

In addition, the Financial Services Commission (FSS), South Korea’s primary financial regulator, will prioritize and discuss stablecoins during the second legislative phase of the nation’s Virtual Asset User Protection Act.

It is believed that the FSS intends to confer with other regulatory bodies in different jurisdictions, such as the European Union and Japan. Despite this declaration, the government agency needed to offer a precise timeframe for consultation.

Reports show that the first stablecoin laws would include a won-pegged token issuance structure. This means that a legal framework for stablecoins tethered to South Korea’s won fiat currency will need to be established before extending to stablecoins denominated in foreign currencies.

The Japanese government released stablecoin regulations after the 2022 Terra crash. Japan outlawed the issuance of stablecoins by non-banking institutions on June 3, 2022. However, the prohibition was abolished in 2023.

In the meantime, stablecoins that did not comply with the EU’s Markets in Crypto-Assets Regulation had to be delisted by cryptocurrency exchanges as of June.

Cryptocurrency laws are tightened in South Korea.

Recently, South Korea strengthened its policies by imposing legislation safeguarding cryptocurrency users. The nation’s Virtual Asset Protection Act was enacted on July 19 and requires virtual asset service providers (VASPs) to uphold stronger regulations to safeguard user assets.

VASPs are required by law to obtain insurance coverage against malicious assaults and hacking. They also require providers to maintain bank customer deposits and retain user assets apart from exchange tokens. The regulation also mandates that token postings on exchanges be routinely examined.

The government of South Korea will likewise punish violators severely. This entails fines and jail terms three to five times the profits obtained through illicit means.