South Korea Plans Credit Card Ban for Crypto Purchases

South Korea is set to implement significant changes in its cryptocurrency landscape, with the Financial Services Commission (FSC) proposing a ban on using credit cards for cryptocurrency purchases. The move is prompted by concerns about the illegal outflow of domestic funds, potential money laundering risks, and the encouragement of speculative activities associated with citizens using credit cards on foreign crypto exchanges.

The FSC’s proposed amendment to the credit finance act aims to restrict local citizens from leveraging credit cards for cryptocurrency transactions, particularly on overseas platforms. Currently, local cryptocurrency exchanges enforce strict identity verification for transactions within the country, but these safeguards are not applicable to foreign exchanges.

The regulatory body is actively seeking public input on this proposal until February 13, opening a dialogue with organizations and individuals to ensure comprehensive feedback. The FSC anticipates a thorough review and resolution process, with a targeted implementation in the first half of 2024.

This move aligns with South Korea’s broader regulatory approach to crypto transactions, as seen in the 2021 amendment to the financial reporting law. Under this amendment, South Korean crypto users are mandated to trade through verified withdrawal and deposit accounts on local exchanges, promoting transparency and accountability.

The proposed ban on credit card transactions echoes the FSC’s commitment to strengthening investor protection in the cryptocurrency space. Last month, the regulatory body introduced rules aimed at safeguarding users of crypto exchanges. These rules include a requirement for exchanges to store a minimum of 80% of customers’ deposits in cold wallets, offering enhanced security against potential hacks.

While South Korea has been proactive in establishing regulatory frameworks for the cryptocurrency industry, the proposed ban on credit card transactions reflects a targeted effort to address specific risks associated with foreign crypto exchanges. The FSC’s careful consideration of public feedback and its commitment to a robust review process underscore the importance of a collaborative approach in shaping crypto regulations.