South Korea Eyes Ban on Credit Card Purchases of Cryptocurrency to Combat Illegal Outflows – TokenPost

South Korea considers banning credit card purchases of cryptocurrencies to combat illegal outflows

South Korea's top financial regulator, the Financial Services Commission (FSC), has proposed changing the country's credit financing laws. The goal is to prohibit local citizens from using credit cards to purchase cryptocurrencies.

The FSC, Cointelegraph reported, has expressed concern about possible illegal outflows and money laundering associated with the purchase of cryptocurrencies by South Korean citizens in foreign currency.

Address concerns and risks

FSC highlighted several concerns that have motivated this proposal. These include the possibility of illegal outflows of domestic funds abroad through card payments on virtual asset exchanges abroad. There are also concerns regarding money laundering, speculation, and encouraging speculative activities within the cryptocurrency market.

Currently, local cryptocurrency exchanges in South Korea allow transactions between virtual assets through deposit and withdrawal accounts, which requires user identity verification. However, these regulations do not extend to foreign crypto exchanges, creating a loophole.

By banning the use of credit cards for cryptocurrency purchases, South Korea aims to improve supervision and regulation of virtual asset transactions. This measure is crucial to combat illegal outflows, prevent money laundering and curb speculative activities in the cryptocurrency market.

Seeking public input and implementation timeline

According Yonhap News Agency, the FSC invites the public to comment on the proposed ban until February 13. After this, the proposal will undergo a review and resolution process. If approved, the new regulations are expected to be implemented in the first half of 2024. Additionally, the enforcement ordinance will be revised to include virtual assets in the list of prohibited card transactions.

Concerns about the outflow of domestic funds abroad due to card payments have led the FSC to include virtual assets in the ban on card transactions. This will facilitate cooperation with international brands such as Visa and Mastercard, ensuring a stronger regulatory framework for virtual asset management.

Impact on national and foreign currencies

South Korea's domestic virtual asset exchanges are already subject to the Law on Reporting and Use of Specific Information on Financial Transactions. These exchanges facilitate transactions only through deposit and withdrawal accounts with verified real names. However, offshore virtual asset exchanges operate outside of these regulations, posing a risk to domestic funds.

Photo: Markus Winkler/Unsplash

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