South Korea has emerged as a prominent player in the global cryptocurrency landscape, with a regulatory framework that balances innovation and security. Here's a detailed overview of the country's crypto policy:
*Regulatory Framework*
- *Legal Status*: Cryptocurrencies are not considered legal tender in South Korea, but they're not banned either. The government recognizes the potential of blockchain technology and digital assets while prioritizing safety and integrity.
- *Real-Name Bank Accounts*: Since 2018, cryptocurrency traders are required to use real-name bank accounts to enhance transparency and security.
- *Anti-Money Laundering (AML) and Know Your Customer (KYC)*: Cryptocurrency service providers must implement strict AML/KYC procedures to prevent illicit activities ¹.
*Key Regulatory Developments*
- *March 2020 Amendment*: This amendment officially legalized cryptocurrencies in South Korea and mandated compliance measures for virtual asset service providers (VASPs).
- *Registration with Financial Regulators*: VASPs must register with Korean financial regulators and adhere to strict guidelines.
- *Information Security Management System (ISMS) Certificate*: VASPs must acquire an ISMS certificate to ensure robust information security measures.
*Affected Entities*
- *Cryptocurrency Exchanges*: Platforms that facilitate buying and selling of cryptocurrencies.
- *Custodian Wallet Providers*: Entities offering secure storage solutions for virtual assets.
- *Initial Coin Offering (ICO) Projects*: Projects that engage in token sales or fundraising activities involving virtual assets.
- *Blockchain-Based Financial Services Providers*: Companies offering blockchain-based financial services, including lending, borrowing, and asset management.
*Taxation*
- *Crypto Tax Delay*: The implementation of crypto taxation has been delayed multiple times due to infrastructure concerns. A recent proposal suggests delaying taxation until 2028.
- *Tax Rate*: The proposed tax rate is 20% on miscellaneous income from crypto transfers, with a threshold of 2.5 million won ($1,809) per year ².
*Future Directions*
- *International Compliance*: South Korea aims to align its cryptocurrency regulations with international standards, particularly those set by the Financial Action Task Force (FATF).
- *Age Limitations*: There may be age restrictions for local consumers engaging in cryptocurrency activities.
- *Taxation Framework*: The government is working on developing a clear taxation framework for cryptocurrencies .