In a bid to curb potential illegal outflows and money laundering, South Korea’s top financial regulator, the Financial Services Commission (FSC), is proposing significant changes to the country’s credit finance laws. The proposed amendments aim to prohibit local citizens from using credit cards to purchase cryptocurrencies, particularly from foreign exchanges.
Crypto Credit Clampdown
The Financial Services Commission Notice released detailed information about the proposed changes. The primary reasons cited for the revision of the Enforcement Decree of the Credit-Specialized Financial Business Act include concerns about the illegal outflow of domestic funds overseas, potential money laundering risks, speculative activities, and the encouragement of speculative behavior.
One of the key modifications outlined in the proposed amendments is the expansion of the scope of prohibited credit card payments. The draft specifies that payments for virtual assets, as defined by the “Act on the Protection of Virtual Asset Users,” will be prohibited. This move is intended to address concerns about the outflow of funds to overseas virtual asset exchanges.
The FSC also aims to resolve regulatory arbitrage related to the limit on providing economic benefits when recruiting new credit cards. Currently, there are varying limits for online and offline recruitment methods. The proposed amendment seeks to standardize the limit to 100% of the annual fee, irrespective of the recruitment method, thus eliminating regulatory differences.
In addition, the proposed changes include an increase in the usage limit of prepaid cards. The existing law caps the maximum issuance amount at 500,000 won, but the amendment acknowledges the need to accommodate the increasing unit price of child meal payments. Accordingly, the maximum issuance amount for children’s meal cards is set to be raised to 1 million won, aiming to alleviate inconveniences caused by exceeding the current usage limit.
Lastly, the FSC aims to diversify funding methods for credit finance companies by expanding the assets that can be securitized. The current limitation to assets related to the companies’ own business, such as installments and leases, will be broadened, allowing credit-specialized financial companies to explore alternative means of raising funds.
The proposed amendments underscore South Korea’s commitment to strengthening regulatory measures surrounding cryptocurrency transactions, reflecting a broader global trend toward increased scrutiny of the digital asset market. The FSC encourages public input on these proposed changes, emphasizing transparency in the decision-making process.
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