#SouthKoreaCryptoPolicy South Korea has implemented a comprehensive regulatory framework for cryptocurrencies, aiming to enhance investor protection, combat illicit activities, and align with global standards. Here's an overview of the key policies and regulations:
📜 Key Regulatory Developments
1. Virtual Asset User Protection Act (VAUPA) – Effective July 19, 2024
This landmark legislation mandates that Virtual Asset Service Providers (VASPs), including exchanges and custodians, adhere to stringent requirements:
Cold Wallet Storage: At least 80% of user assets must be stored in cold wallets to mitigate hacking risks.
Segregation of Funds: User deposits must be kept separate from the platform's operational funds.
Insurance and Reserves: Platforms are required to maintain insurance or reserve funds to cover potential losses.
Real-Time Monitoring: Mandatory surveillance systems to detect and report suspicious activities.
Penalties for Non-Compliance: Violations can result in fines up to five times the amount of unfairly gained profits or imprisonment .
2. Act on Reporting and Using Specified Financial Transaction Information
This law enforces Anti-Money Laundering (AML) measures, including:
Travel Rule Compliance: Requiring VASPs to collect and transmit sender and recipient information for transactions exceeding 1 million KRW (approx. $740).
Registration Requirements: Mandating VASPs to register with the Korea Financial Intelligence Unit (KoFIU) and obtain Information Security Management Systems (ISMS) certification .
🌐 Cross-Border Transaction Oversight
Starting in the second half of 2025, South Korea plans to regulate cross-border virtual asset transactions:
Monthly Reporting: Businesses involved in such transactions must report to the Bank of Korea.
Pre-Registration: Mandatory registration with relevant authorities before engaging in cross-border activities.
Enhanced Monitoring: Establishment of a virtual asset transaction monitoring system to detect and prevent illicit activities .
💰 Taxation of Cryptocurrency
As of January 1, 2025, South Korea imposes a 20% tax on cryptocurrency gains exceeding 50 million KRW (approx. $35,900) annually. Taxable gains are calculated as the difference between the selling price and acquisition cost, adjusted for transaction fees. For individuals unable to provide detailed acquisition records, up to 50% of the sale price may be treated as the acquisition cost .
🧾 Transparency and Disclosure
In 2024, South Korea introduced measures to enhance transparency:
Public Official Declarations: Approximately 5,800 public officials are required to declare their cryptocurrency holdings.
Corporate Disclosures: Companies must adhere to new accounting standards, detailing their crypto activities and holdings .
⚖️ Enforcement and Compliance
The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) oversee the crypto market, ensuring compliance with regulations. Non-compliant exchanges may face penalties or expulsion from the market .
These measures position South Korea as a leader in cryptocurrency regulation, balancing innovation with investor protection. ❤️🤞
