South Korea’s Financial Services Commission (FSC), the country’s top financial regulator, has proposed an amendment to the Credit Finance Act, which aims to effectively prohibit local citizens from purchasing cryptocurrencies with credit cards. In a Jan. 3 legislative notice, the FSC cited concerns about money laundering and illegal outflows that could come with South Korean citizens buying crypto from foreign exchanges.
The FSC stated:
“Concerns have been raised about illegal outflow of domestic funds overseas due to card payments on overseas virtual asset exchanges, money laundering, speculation, and encouragement of speculative activities.”
In addition, the regulatory body expects the establishment of a basis for collaboration with international brands and the strengthening of measures for the prevention of foreign currency outflow and money laundering.
The proposal listed a public feedback period extending until Feb. 13, allowing for comments and input from organizations and individuals. After this period, the amendment is expected to undergo review and a voting process, aiming for enactment in the first half of 2024, according to Yonhap News Agency.
Under existing laws, local crypto exchanges permit transactions only between virtual assets through deposit and withdrawal accounts. Through these accounts, the user’s identity can be verified. However, these rules don’t apply to foreign crypto exchanges.
High Crypto Adoption Rate
South Korea is one of the most profitable markets when it comes to crypto. The region has a high crypto adoption rate. According to a KuCoin survey, 26% of South Korean adults are holding cryptocurrencies.
South Korea is not the first to ban buying crypto using credit cards. Earlier, Taiwan already restricted the use of credit cards for crypto purchases and even asked credit card companies and banks not to partner with cryptocurrency service providers as merchants.
Besides this, a recent investigation by the Anti-Corruption and Civil Rights Commission in South Korea has disclosed substantial crypto trading activities among the country’s lawmakers. Over the past three years, they collectively traded crypto assets worth about 125.6 billion won ($97.6 million).
The commission’s report revealed that 18 lawmakers owned virtual assets, with 11 engaging in active trading. The lawmakers’ selling and buying transactions amounted to 63.1 billion won ($48.8 million) and 62.5 billion won ($48.4 million), respectively. The report also disclosed a diverse portfolio of virtual assets, consisting of 107 different types, with Bitcoin leading the list.