The Bank of Korea (BOK) plans to draft an amendment to the Foreign Exchange Transactions Act with the government before year-end to regulate stablecoins as a reportable means of payment, according to a submission to the National Assembly's annual audit.
Forex Oversight and the Digital Asset Basic Act
According to the October 22 central bank report disclosed by local outlet Digital Asset, the BOK is consulting with government authorities to establish cross-border digital asset monitoring systems. Classifying stablecoins as a "means of payment" under Korean forex law requires reporting international token transfers, placing foreign currency stablecoins under traditional capital controls rather than making them legal tender.
The central bank identified non-bank settlements, crypto mixers, and unhosted wallets as primary regulatory gaps that facilitate illicit cross-border movement. This forex initiative moves alongside the Digital Asset Basic Act, an upcoming legal framework for crypto licensing and stablecoin issuance. Financial Services Commission (FSC) chairman Lee Eog-weon stated on Thursday that consultations on the bill are in their final stage, according to Bloomingbit.
Political Friction and Crypto Tax Debates
South Korea's foreign exchange push unfolds amid intense political debate over the country's crypto income tax, scheduled for implementation on January 1, 2027, following three prior postponements. Lawmakers have questioned taxing market participants before passing the comprehensive governing legislation. FSC Chairman Lee Eog-weon noted that tax implementation should "take various circumstances into full consideration," as reported by Yonhap.
Democratic Party leader Kim Min-seok also called for a "thorough final review" of the timeline. Additionally, two separate citizen petitions—one requesting tax repeal and another seeking a two-year delay—each reached the 50,000 signature threshold required for formal legislative review. Despite political debates, the National Tax Service intends to finalize its draft tax notice by October 30. These structural shifts occur as retail crypto transfers rise up to 78% in downturn periods, highlighting the persistent demand for digital asset flows across retail channels.
Key Takeaways
- The Bank of Korea plans to amend the Foreign Exchange Transactions Act before the end of the year.
- Stablecoins will be classified as reportable "means of payment" to enforce capital controls.
- FSC Chairman Lee Eog-weon confirmed the Digital Asset Basic Act is nearing legislative completion.
- Two petitions with over 50,000 signatures each have forced a legislative review of the January 1, 2027 crypto tax.
Why It Matters
By categorizing dollar stablecoins under foreign exchange rules, South Korea aims to close capital flight loopholes that historically drove the regional "kimchi premium." Enforcing strict reporting on stablecoins targets unhosted wallets and cross-border crypto arbitrage without halting institutional framework development. However, political friction between tax deadlines and primary crypto licensing laws creates an uncertain timeline for Korean traders through 2026.
