🌎 South Korea to Impose Foreign Exchange Controls on Stablecoins

South Korea is planning to impose foreign exchange controls on stablecoins, underscoring the government’s concerns over their growing use in cross-border trade.

South Korea’s Regulatory Plans for Stablecoins

South Korea is weighing the introduction of foreign exchange controls on stablecoins, reflecting government concerns over their growing use in cross-border trade. The Ministry of Economy and Finance is reportedly reviewing measures to enhance the stability of crypto transactions, particularly those involving stablecoins.

While stablecoins have been widely used primarily within the cryptocurrency ecosystem, the ministry believes that they may soon function as a payment and transaction method in the real economy. There are concerns that these assets are operating outside government oversight, posing risks to the stability of South Korea’s foreign exchange market.

Expected Regulatory Developments

Though no specific timeline has been announced, the Financial Services Commission is expected to prioritize discussions on stablecoin regulation in its forthcoming legislative efforts. These discussions will likely draw from regulatory frameworks established in Japan and the European Union.

Broader Efforts to Tighten Crypto Market Oversight

The potential regulatory shift follows the South Korean government’s broader efforts to tighten oversight of the local crypto market. Korean crypto exchanges, such as Upbit, Bithumb, and Coinone, will soon be obligated to pay an oversight fee to the Financial Supervisory Service of South Korea beginning next year as the country steps up its regulatory framework for the crypto sector.

Local industry representatives initially suggested delaying the imposition of supervisory fees on crypto operators. However, the decision to implement these fees was expedited due to upcoming inspections by the FSS following the enforcement of the Virtual Asset User Protection Act.

New Requirements for Crypto Exchanges

The new law introduces several requirements for crypto exchanges, including a mandate to keep at least 80% of users’ assets in cold storage. These assets must be kept separate from company funds and invested in “risk-free” assets to generate a yield. Additionally, exchanges must reassess listed assets by verifying their circulation and reviewing their whitepapers, with any assets that fail to meet the criteria required to be delisted.

The recent enforcement follows the postponement of a 20% crypto gains tax by South Korea’s Ministry of Economy and Finance, with reports indicating that the ruling party may delay the tax until 2028.