The Bank of Korea (BOK) has announced plans to draft an amendment to the Foreign Exchange Transactions Act by year-end, aiming to regulate stablecoins as a means of payment. This initiative, detailed in a written submission to the National Assembly’s annual audit on October 22, seeks to tighten cross-border controls rather than grant legal-tender status to digital assets. The central bank intends to collaborate with the government to establish a monitoring system based on foreign exchange network reporting, addressing regulatory gaps around personal wallets and settlement outside traditional banking systems.
This move runs parallel to the development of the Digital Asset Basic Act, a broader licensing and issuance framework highlighted in the government’s 2026 growth strategy alongside spot bitcoin ETF approvals. Financial Services Commission Chairman Lee Eog-weon stated that consultations for this act are in their final stages, with the bill expected soon. Meanwhile, South Korea faces significant legislative tension regarding its crypto income tax, which is scheduled to take effect on January 1, 2027, after three previous postponements. Lawmakers have questioned taxing a market before the defining law is passed, prompting Democratic Party leader Kim Min-seok to call for a thorough final review.
Public pressure has intensified, with two petitions—one seeking repeal and another requesting a two-year deferral of the tax—each surpassing the 50,000 signatures required to trigger a mandatory legislative review. Despite these developments, the National Tax Service maintains its schedule to finalize its draft tax notice by October 30. The BOK noted that current capital controls contribute to phenomena like the kimchi premium, suggesting that tighter forex regulations could entrench these controls rather than alleviate them.
The Bank of Korea's push to amend the Foreign Exchange Transactions Act signals a strategic shift toward integrating stablecoin oversight into existing capital control frameworks. By classifying stablecoins as "means of payment," regulators aim to close loopholes used for illicit cross-border transactions without altering the fundamental monetary status of these assets. This approach prioritizes financial stability and anti-money laundering compliance over immediate adoption or legal tender recognition, reflecting a cautious regulatory stance that balances innovation with strict oversight.
Concurrently, the friction between the impending crypto tax deadline and the delayed Digital Asset Basic Act creates a complex regulatory environment. The requirement for legislative review following public petitions indicates growing political sensitivity to taxation timing. If the tax takes effect before comprehensive asset laws are finalized, it may expose inconsistencies in how virtual assets are classified and taxed, potentially undermining investor confidence and complicating enforcement efforts for the National Tax Service.
