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Cryptocurrency News Articles
S. Korean Gov't to Set Up Virtual Asset Transaction Monitoring System
Oct 25, 2024 at 10:27 am
The South Korean government will establish a virtual asset transaction monitoring system to ensure transaction soundness, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok said in Washington, D.C., on Oct.
The South Korean government will establish a virtual asset transaction monitoring system to ensure the soundness of transactions, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok announced in Washington, D.C., on Oct. 24 (local time).
Choi, who is on a business trip to the G20 Finance Ministers' Meeting in Washington, D.C., met with Korean journalists and announced a set of measures to address the recent surge in cross-border transactions of stablecoins like Tether.
During the meeting, Choi highlighted the increasing cases of illegal foreign exchange transactions — such as corporate tax evasion and money laundering for drugs and gambling — that are associated with these digital assets.
Prompted by the rise in cross-border stablecoin transactions, the government will push for mandatory reporting of these activities. “We will push for mandatory reporting of stablecoins traded across borders,” Choi emphasized. Stablecoins, such as Tether (USDT) and USD Coin (USDC), are pegged to the dollar at a 1:1 ratio, making them attractive for their low price volatility and fast, convenient remittance capabilities based on blockchain technology.
Choi acknowledged the regulatory challenges posed by the lack of a basic law on virtual assets, stating, “Since a basic law on virtual assets has not yet been established, it is unclear whether stablecoins traded across borders should be viewed as a means of payment or as capital transactions.” However, he added, “Given the increasing suspicious cases of tax evasion and money laundering for drugs and gambling in recent cross-border transactions, we intend to amend the Foreign Exchange Transactions Act to provide a regulatory basis.”
The proposed amendments to the Foreign Exchange Transactions Act will classify virtual assets as a "third type" that is not included in foreign exchange, external payment means, or capital transactions. Virtual asset service providers handling cross-border transactions will be required to register in advance and report transaction details monthly to the Bank of Korea. This information will be shared with the National Tax Service, Korea Customs Service, Financial Intelligence Unit (FIU), Financial Supervisory Service, and the International Financial Center for monitoring and detecting illegal transactions, as well as for statistical and analytical purposes.
Choi also mentioned that discussions on institutionalizing virtual assets for trade and capital transactions will begin next month in the Virtual Assets Committee, which will be launched under the leadership of the Financial Services Commission. “Discussions will begin next month in the Virtual Assets Committee, which will be launched under the leadership of the Financial Services Commission,” he said, avoiding a definitive answer on the matter.
During the meeting, Choi addressed concerns about the recent weakness of the won, which has approached the 1,400 won level against the dollar. He attributed this to a complex crisis involving North Korea's dispatch of troops to Ukraine and China's low growth, rather than the fundamentals of the Korean economy. “Exchange rates can vary in the short term depending on a country's macro policies and circumstances,” Choi explained. “A strong economy does not necessarily lead to a strong currency.”
Choi further elaborated on the relationship between exchange rates and economic fundamentals, stating, “The yen has been weak for a long time, but it’s not because Japan's competitiveness has declined.” He emphasized that exchange rates are closely related to a country's price levels, purchasing power, and competitiveness in the mid to long term. The inclusion of Korea in the World Government Bond Index (WGBI) is expected to bring top-tier foreign capital into the country, enhancing the stability of the won.
In response to concerns that the won's weakness reflects negative assessments by foreign investors regarding the Korean economy, including sluggish domestic demand and real estate project financing (PF), Choi noted, “It can vary depending on whether it is short-term or long-term capital.” He added, “Hedge funds managing short-term funds with maturities of 1-2 years and pension funds operating on a 30-year basis will inevitably have different perspectives on Korea.”
Choi also hinted at the possibility of revising this year's economic growth forecast. On Oct. 24, the Bank of Korea announced that the real gross domestic product (GDP) growth rate for the third quarter was 0.1% compared to the previous quarter. “It is difficult to comment on the annual growth rate at this time, but there will be mention of it when the economic policy direction is announced in December,” Choi said. “Downside risks to the growth rate have increased, but we need to monitor the situation further.”
Regarding the impact of the sluggish third-quarter GDP growth rate on next year's revenue forecast, Choi remarked, “Revenue is largely determined by corporate income tax and capital gains tax from real estate transactions, and the situation has been somewhat decided up to the third quarter of this year.” He added, “There is not much uncertainty.”
Choi also addressed the growing crisis faced by Samsung Electronics due to recent poor performance, viewing it as an opportunity. “The crisis of Samsung Electronics signifies a crisis
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