South Korea moves to ban crypto purchases with credit cards
Under the proposal, cryptocurrencies would be designated as "prohibited for payment" under the country's credit finance laws.
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South Korea’s financial regulator proposed banning the use of credit cards to buy cryptocurrency, citing concerns over illegal capital outflows and anti-money laundering risks.
“Concerns have been raised about illegal outflow of domestic funds overseas due to card payments on overseas virtual asset exchanges, money laundering, speculation, and encouragement of speculative activities,” the Financial Services Commission (FSC) said in a notice.
Under the proposal, cryptocurrencies would be designated as “prohibited for payment” under the country’s credit finance laws. If implemented, such a rule would bar consumers from buying digital assets with credit cards from both domestic and foreign crypto exchanges.
Currently, rules requiring user identity verification only apply to domestic trading platforms. Authorities aim to close a perceived regulatory loophole by extending restrictions to overseas exchanges.
“Accordingly, virtual assets […] are stipulated as prohibited for payment,” the FSC said.
The public consultation period will run until Feb. 13, 2024, while the amendments are expected to pass through the legislative process in the first half of 2024 if approved.
South Korea has taken a relatively strict regulatory stance on cryptocurrencies to date. In 2021, it banned financial institutions from directly handling virtual asset transactions, though banks could still provide payment services and keep cryptocurrency exchange accounts. South Korea has already taken steps to tighten its oversight of trading through amendments made in 2021.
The country requires domestic crypto exchanges to partner with local banks and verify user identities for withdrawal and deposit accounts. Traders can only access these platforms by submitting their names under the “real-name” system.
The rules have made it more difficult for South Koreans to trade virtual assets anonymously on domestic exchanges. However, overseas platforms and decentralized exchanges remain an avenue for those seeking to bypass identity checks and other strict local regulations.
These stringent rules which have been implemented since 2021 around licensing and banking partnerships, have resulted in a consolidation of activity towards a handful of major South Korean crypto platforms. Research from CCData shows that the total market share of exchanges based in South Korea surged to 12.9% in November 2023, up from 5.2% in January 2023.