'coyne abuse' preventing exchange and tax evasion...promoting the revision of the foreign exchange transaction act

The government will strengthen cross-border transaction monitoring of virtual assets through the Foreign Exchange Transactions Act to prevent tax evasion and exchange of coins.

Deputy Prime Minister and Strategy and Finance Minister Choi Sang-mok told reporters in Washington, D.C., where he visited to attend a meeting of finance ministers from the Group of 20 countries, that he planned to push for a revision of the Foreign Exchange Act on virtual assets to be implemented in the second half of next year.

Deputy Prime Minister Choi said that as the number of stablecoins such as Tether has increased recently and are listed on major domestic exchanges, the number of cross-border virtual asset transactions using stablecoins has increased.

"We will impose a pre-registration obligation on virtual asset operators and make it mandatory to report cross-border transactions to the Bank of Korea regularly," he stressed.

The government plans to revise the bill in the first half of next year to establish a definition of virtual assets and virtual asset operators in the Foreign Exchange Transactions Act.

We plan to apply the Virtual Asset User Protection Act to define virtual assets as a third type that is not included in foreign exchange, foreign payment means, and capital transactions.

If virtual assets are defined in the Foreign Exchange Transactions Act, operators such as exchanges will be obliged to register in advance to handle cross-border virtual asset transactions.

In the future, the details of cross-border virtual asset transactions will be reported to the Bank of Korea every month.

This information can be provided to the National Tax Service, the Korea Customs Service, the Financial Information Analysis Institute, the Financial Supervisory Service, and the International Financial Center and used for monitoring, detection, statistics, and analysis of illegal transactions.

Currently, there are 40 related operators in Korea.

It is expected that 28 virtual asset exchanges and 12 storage and management companies will be targeted.

Until now, virtual assets have not been defined in the Foreign Exchange Transactions Act, so there has been no system to confirm the purpose of the transaction or to report individual transaction information.

Accordingly, the National Tax Service and the Korea Customs Service are checking the transaction details of virtual assets by executing case-by-case requests or seizure warrants.

Due to these blind spots, virtual assets are increasingly being abused for various crimes such as tax evasion, smuggling, and exchange.

Foreign exchange is an illegal foreign exchange transaction that disguises foreign exchange transactions across borders as if they were transactions made in Korea.

According to the Korea Customs Service, out of 11 trillion won in foreign exchange crimes detected from 2020 to July this year, 9 trillion won was related to virtual assets, accounting for more than 80%.

Deputy Prime Minister Choi stressed that it does not mean institutionalizing cross-border transactions using virtual assets, but that it has a system to monitor what virtual asset operators actually trade.

This means that it is not recognized as a legal means of external payment, such as receiving trade payments as virtual assets.