Previously, the state authorities of South Korea did not regulate the crypto industry in any way, so many different crypto exchanges worked here. However, the rules are changing, and government agencies have passed legislation requiring all organizations to obtain a Korea crypto license. This is quite difficult, so it makes sense to tell more about the new rules
Cryptocurrencies have had a significant impact on the financial industry around the world. Many people are abandoning their usual work in favor of mining and trading. Government agencies worldwide strive to learn how to control this industry to protect their users from fraud, money laundering, and financial terrorism.
Currently, the crypto industry in this jurisdiction is in a gray area. Currently, crypto assets are not a legal payment method; at least, you can pay for goods and services using crypto assets if both transaction members agree. In 2022, the government of this country decided to introduce rules for regulating crypto exchanges. To open a business here, register your organization and pay taxes regularly. Organizations that carry out such activities are subject to licensing:
Thus, crypto exchanges and electronic wallets are subject to licensing. The number of crypto enthusiasts in the country is quite large. According to some reports, about 2 million people in the country own crypto assets. They make up about 4% of the country’s total population, and this percentage is constantly growing. Thus, doing business in this jurisdiction is efficient.
The governing bodies of the country have decided based on which the entire crypto business must be licensed. The crypto currency exchange license had to be obtained by crypto exchanges by September 24, 2022, to legally conduct their business on the South Korean crypto platforms.
The Korean Financial Supervisory Authority (FSC) is in charge of detecting unlicensed exchanges. If such a company is identified, fines are imposed on the business; websites are blocked, as well as financial activities. Moreover, management has the right to notify the countries where these organizations are registered with a message that these companies refuse to comply with the country’s laws.
There is a reasonably strict Korean cryptocurrency regulation. In 2017, there were reports that the crypto industry would be banned entirely; however, such bills were never recognized. Stringent reporting rules have been introduced for banks with crypto exchange accounts. In this country, anonymous transactions are entirely prohibited. The bank and the dealer must verify the identity of the person who performs crypto transactions.
In 2020, amendments were made to the legislation, which obliges all crypto exchanges that operate in the country to verify customer data. You cannot work without a cryptocurrency license in Korea and serve clients who have previously been involved in fraud or money transfers.
Crypto regulations have introduced strict rules for doing business. There are rigorous reporting requirements. So, in 2021, information appeared on the network that 11 crypto organizations were closed due to fraudulent schemes. Government agencies are closely studying the activities of the crypto business, and as soon as they notice a hint of fraudulent activities, they block the work of such organizations.
The release of ICO by local organizations and individuals is prohibited here. In addition, the Crypto Asset Margin Offering is against the law due to the extreme volatility that some crypto assets may experience.
However, if you are willing to work honestly and openly, there will be no particular problems
Starting a new Korean crypto business is a complicated process. To begin with, you must carefully study the features of regulating crypto assets in this jurisdiction. Next, you need to think through the activities of the future organization to the smallest detail and create a business plan that will describe all the services you will provide, where you will get funding from, and how you will comply with anti-money laundering requirements.
After that, you need to create unique software where particular attention should be paid to client verification. Each registered person on your platform must provide proof of identity and residence. Your system should check all customers and ensure that the platform does not serve customers previously involved in fraud.
You must also store all transaction data, so you need ample enough storage.After that, you should register your organization and complete a comprehensive audit. Next, you need to open a bank account. Banks consider the crypto business very risky, so they often refuse such clients. Thus, we advise you to make a risk assessment in advance, making it easier for you to cooperate with banks.
Next, you need to collect documents for obtaining a cryptolicense. This package should include all the details of the owners, shareholders, and people who hold key positions, a business plan, and anti-money laundering documents. After that, regulators will review the activities of your organization. They can make recommendations to improve your organization’s operations if they notice the slightest non-compliance.
As you can see, creating a crypto organization in this jurisdiction is a highly complex process, so you can only do it with the help of specialists. The licensing requirements came into force only in the summer of 2021, so only a few law firms operate in this region.
To work with cryptocurrency Korea, you must get a work permit. Those companies that start working without a work permit will face sanctions. To obtain a work permit, your organization must meet the following requirements:
Your company must have an authorized bank account. Otherwise, the owner can be sentenced to 5 years in prison and pay a hefty fine. As you can see, if you do not comply with the requirements of state regulators, you may get into big problems with the law.
The licensing process for crypto exchanges was introduced relatively recently – on 09/24/2022. And the costs for its registration will depend on many factors – for example, how to fulfill all the legislation requirements for its registration. If you want to learn more about the cost of its registration, then contact our specialists.
There is currently no taxation of cryptocurrencies in South Korea. But this situation may change shortly. The Ministry of Finance was supposed to introduce taxation on virtual currency profits from the beginning of 2022, but this decision has been delayed to 2023.
When determining the amount of tax, it is considered whether the person is a resident. Hence the difference in tax rates.
A tax is applied to a resident, and the rate is determined separately, considering only income from virtual funds. A local tax of 10% is taken on the final amount of taxation, which has 22% of the profit of virtual funds.
Tax is taken from non-residents when their crypto operations are considered domestic.
If a company decides to enter this country’s crypto business, it must remember that all crypto operations are regulated and monitored.
When a virtual asset carries the properties of securities, it is regulated by the Law on Financial Transactions and Market Capital. If a crypto asset is simply a means of payment, then the “Law on Transactions with Foreign Exchange” and the “Law on Financial Electronic Transactions” deal with its regulation. And if a crypto asset has a product characteristic, it is regulated by the “Value Added Tax Law.”
But before you start your financial activities, you must register with the Korean Financial Intelligence Agency, as well as register with the local financial regulator. This rule is effective from March 25, 2021.
In addition, it is essential to know that in this country, from September 24, 2022, all companies engaged in crypto activities must have a crypto license in Korea. Otherwise, the action of the organization will be considered illegal.
This advantage appeared relatively recently – in September 2022. The authorities of the South Korean Republic have introduced mandatory licensing for the activities of crypto exchanges because many criminal transactions with virtual currency were previously carried out. It was a good reason for strengthening control measures over this activity.
Now in this country, it is legally possible to deal with virtual currency only by a company with a crypto exchange license to import crypto-assets – VASP. An organization that does not have this registration is illegal to conduct business.
The FSC is a legislative body that controls all crypto firms’ activities and monitors transactions with virtual assets.
In addition, the regulation of legislation related to crypto-operations is based on the requirements of AML (preventing financial transactions by illegal means).
Thanks to the functioning of AML, crypto exchanges are subject to complete control over their activities. According to the new requirements, the following reporting and regulations are carried out for licensed companies:
As we can see, the South Korean government has become more thoroughly controlled by crypto exchanges. And this means that it has become safer to start your crypto business in the South Korean Republic.
Understanding all the features of the regulation of the crypto industry in this country is extremely difficult, so you can only do it with the help of specialized lawyers. The specialists of our company will tell you more about regulations and obtaining a license in South Korea. They will conduct a comprehensive consultation (this can take a long time, so we advise you to be free the whole day), analyze your company’s work, and suggest how to make it fully comply with the requirements of government agencies.
They will also help with opening a bank account and tell you which banks are willing to cooperate with crypto organizations and on what conditions. Recall that the absence of a bank account can lead to the opening of a criminal case against the company’s owner, so this aspect needs to be given a lot of attention.
Our specialists will help to collect the necessary package of documents and will be able to represent your interests in government bodies.
Crypto assets are not legal tender in this jurisdiction, but you can use them to pay for goods and services if both parties agree.
Yes, there are cryptocurrencies in this country, and using them is legal, but on the condition that you use licensed exchanges.
Yes, but for this, you must use licensed crypto exchanges.