South Korea is making significant strides toward establishing a formal regulatory framework for digital assets, with recent discussions indicating strong momentum for recognizing Bitcoin and Ethereum as legitimate forms of payment. In a landmark public hearing held at the National Assembly Library in Seoul, government officials, lawmakers, financial regulators, and academic experts convened to debate proposed amendments to the country’s Electronic Financial Transaction Act—a move that could reshape the future of cryptocurrency adoption in one of the world’s most active crypto markets.
The hearing, led by Democratic Party lawmaker Park Yong-jin, marks a pivotal moment in South Korea’s evolving stance on blockchain technology and digital currencies. Park, who chairs the legislative committee overseeing financial innovation, has introduced three key revisions aimed at regulating crypto trading platforms, enhancing investor protection, and laying the groundwork for broader acceptance of digital assets in everyday transactions.
A Regulatory Framework for Digital Assets
Currently, South Korea lacks comprehensive legislation specifically designed to govern cryptocurrency transactions. This legal gap has left investors vulnerable and hindered the growth of a transparent, secure digital asset ecosystem. As Park emphasized during the session:
"Without a legal framework, we cannot regulate, nurture, or support the digital asset industry. The absence of laws also allows criminals to exploit virtual currencies without consequence."
This concern gained urgency following high-profile security breaches, such as the 2017 hack of Bithumb—one of South Korea's largest cryptocurrency exchanges—where user data and funds were compromised. Such incidents underscored the need for stronger consumer safeguards and clearer regulatory oversight.
The proposed amendments aim to close these gaps by formally defining digital assets within national law. While debate continues over whether tokens should be classified as currencies or assets—a distinction with major tax implications—the general consensus leans toward treating them as innovative financial instruments that require tailored regulation rather than outright restriction.
Bitcoin as a Legal Payment Method: Following Japan’s Lead?
One of the most discussed topics during the hearing was whether Bitcoin and other major cryptocurrencies should be recognized as legal means of payment, similar to Japan’s progressive approach. In 2017, Japan amended its Payment Services Act to recognize Bitcoin as legal tender for transactions, boosting merchant adoption and public confidence.
Professor Jung Sun-seop from Seoul National University advocated for a similar path in South Korea. As head of the Financial Law Research Center, he stated:
"Digital assets represent transformative technology—innovative, forward-looking, and capable of generating new business models. They naturally enable new payment methods, including those powered by virtual currencies."
Recognizing crypto as a valid payment option could stimulate fintech innovation, reduce transaction costs, and increase financial inclusion. It would also position South Korea as a regional leader in digital economy development.
However, not all panel members agree on classification. Some members of the seven-member discussion group argue that labeling digital tokens as assets rather than currency may better align with existing financial systems. Still, this could trigger capital gains taxation—an issue many stakeholders hope to avoid.
No New Taxes on Crypto: What It Means for Users
A crucial revelation from the hearing was that while the Electronic Financial Transaction Act will undergo revision, the Income Tax Act and Corporate Tax Act will remain unchanged. This implies that South Korea does not currently plan to impose direct taxes on cryptocurrency holdings or transactions.
Lee Dae-ki, a researcher at the Korea Institute of Finance, noted that most people do not use Bitcoin or Ethereum for daily payments, which reduces immediate pressure for tax policy changes. Instead, the focus remains on regulation, security, and market integrity.
This tax-neutral stance may encourage wider participation in the crypto economy, especially among retail investors hesitant about complex reporting requirements or unexpected liabilities.
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Cross-Border Transfers via Crypto: A Game Changer
Another major development comes from the revised Foreign Exchange Transaction Act, set to take effect on July 18. Under the updated rules, fintech companies can now register with the Financial Services Commission (FSC) to legally offer international money transfer services using digital assets.
Previously, cross-border transfers involving cryptocurrencies were prohibited under foreign exchange laws. The new regulation removes this barrier, allowing licensed firms to send funds overseas using Bitcoin and other digital currencies.
The impact is significant: sending 1 million KRW (~$750 USD) through traditional banks typically incurs fees between 50,000–60,000 KRW and takes 2–3 business days. In contrast, fintech solutions leveraging blockchain technology charge only 3,000–4,000 KRW and complete transactions in minutes.
This efficiency boost could revolutionize remittances, particularly for migrant workers and small businesses reliant on fast, low-cost international payments.
FAQs: Understanding South Korea’s Crypto Shift
Q: Will Bitcoin become legal tender in South Korea?
A: Not yet. While it’s not officially “legal tender,” ongoing legislative efforts suggest Bitcoin may soon be recognized as a legal payment method, similar to Japan’s model.
Q: Are cryptocurrency gains taxed in South Korea?
A: As of now, no. The government has confirmed that income and corporate tax laws won’t change, meaning there are no plans to tax crypto holdings or trades in 2025.
Q: Can I use Bitcoin to pay for goods and services in South Korea?
A: Not widely—but if the proposed amendments pass, merchant adoption could grow significantly, especially among tech-savvy businesses.
Q: Is it legal for fintech firms to use crypto for international transfers?
A: Yes, starting July 18. Registered fintech companies can now use digital assets like Bitcoin for cross-border remittances under the revised Foreign Exchange Transaction Act.
Q: How will these changes protect investors?
A: By establishing clear regulations for exchanges, enforcing cybersecurity standards, and holding platforms accountable—especially after past breaches like the Bithumb hack.
Q: When will the new crypto laws take effect?
A: The revised Electronic Financial Transaction Act is expected to be finalized by the end of the month, following feedback from public hearings.
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The Road Ahead
South Korea’s push to integrate digital assets into its financial system reflects a broader global trend: governments are moving from观望 (observation) to active participation in the blockchain revolution. By focusing on regulation without overburdening users with taxes or restrictions, Seoul has an opportunity to become a model for balanced crypto policy.
With Bitcoin and Ethereum gaining traction not just as investments but as functional tools for payment and remittance, the line between traditional finance and decentralized systems continues to blur. As lawmakers refine definitions and expand use cases, one thing is clear—the era of digital assets in mainstream finance is no longer coming. It’s already here.