South Korea Moves to Open Crypto Transfer Licenses to Fintech Firms

Overview

• Regulators began publicly reporting consultations on Friday as they draft enforcement rules to implement a licensing regime that the cabinet promulgated on June 2 and that will take effect in December after a six-month grace period.
• The revised Foreign Exchange Transactions Act classifies cross-border virtual-asset transfers as regulated foreign-exchange activity and requires firms to register with the Ministry of Economy and Finance and report transfers through the Bank of Korea’s foreign-exchange reporting network.
• A central unresolved decision is whether the enforcement decree will limit licenses to existing Virtual Asset Service Providers such as exchanges and custodians or allow fintech companies to apply for transfer licenses as well.
• The law requires applicants to complete VASP registration where applicable, connect transaction systems to the Bank of Korea’s reporting infrastructure, and meet facilities and staffing requirements that will be set out by presidential decree.
• Opening the license to fintechs could break the exchange-dominated market led by Upbit and Bithumb, create new regulated blockchain remittance and FX services, and strengthen anti–money-laundering oversight while separate tokenized-asset guidance from the Financial Services Commission is expected in July.