National Assembly Approves Amendments to the Foreign Exchange Transactions Act: Introduction of Virtual Asset Transfer Service Registration System and Foreign Exchange Regulatory Reforms

Key Provisions of the Amended Foreign Exchange Transactions Act

• New Definition: The Amendment introduces definitions for “virtual assets,” “virtual asset service providers,” and “virtual asset transfer services” (Article 3 of the Amendment). Notably, “virtual asset transfer services” is defined — differently from the definition under the Act on the Protection of Virtual Asset Users — as the act of transferring virtual assets between Korea and a foreign country through sale, purchase, exchange, or similar transactions by a virtual asset service provider, or any act that produces substantially the same effect. This concept is regulated as a term unique to the Foreign Exchange Transactions Act, premised on cross-border transactions.
• Mandatory Registration and Requirements: Virtual asset service providers seeking to engage in virtual asset transfer services must register with the Minister of Economy and Finance in advance (Article 8-2 of the Amendment). Registration requires meeting all of the following conditions: ① completion of the reporting requirements for virtual asset service providers under the Act on Reporting and Using Specified Financial Transaction Information; ② connection to networks of institutions responsible for relaying, aggregating, or exchanging data related to foreign exchange transactions, payments, receipts, or virtual asset transfers; and ③ facilities and qualified personnel as prescribed by Presidential Decree. Prior notification is also required when changing registered matters designated by Presidential Decree or ceasing operations.
• Criminal Penalties and Monitoring Framework: Those who engage in virtual asset transfer services without registration or through fraudulent means may be subject to imprisonment of up to three years or a fine of up to KRW 300 million; where three times the value of the violation exceeds KRW 300 million, a fine of up to three times that value may be imposed (Article 27-2 of the Amendment). Virtual asset transfer service operators will be subject to reporting, inspection, and data submission requirements under the Foreign Exchange Transactions Act, and will fall under the supervision of the Ministry of Economy and Finance and the Financial Services Commission. Virtual assets acquired through violations such as unregistered operations may be subject to confiscation and collection (Article 30 of the Amendment).

• Restructuring of Specialized Foreign Exchange Business Scope: The scope of specialized foreign exchange businesses will be restructured from the existing categories of currency exchange, small-amount overseas remittance, and other specialized foreign exchange businesses to a framework centered on general currency exchange and overseas payment and settlement services (Article 8(3) of the Amendment). The grounds for revoking registration where a specialized foreign exchange business operator conducts foreign exchange activities in violation of its permitted scope have also been expressly stipulated (Article 12(1)(iv) of the Amendment). Additionally, new grounds have been established allowing the Minister of Economy and Finance to revoke the registration of currency exchange operators that have effectively ceased operations, based on information provided by the head of the competent tax office.
• Introduction of Criminal Penalties for Payment Procedure Violations: Previously, violations of payment procedures — including currency exchange, remittance, and capital outflow — were subject only to administrative fines of up to KRW 50 million. The Amendment now provides criminal penalty grounds — imprisonment of up to one year or a fine of up to KRW 100 million — for those who violate payment procedures in the course of making or receiving payments or transferring funds with the intent to unlawfully acquire property or financial benefits for themselves or a third party (Article 29(1)(vii) of the Amendment).
• Refinement of Capital Transaction Definitions and Macroprudential Stability Levy Procedures: The definition of capital transactions has been revised to ensure that expenses for maintaining overseas branches are not excluded from the scope of capital transactions (Article 3(1)(xix) of the Amendment). Procedures have also been codified to allow objections to be filed within 30 days of receiving a notice of macroprudential stability levy assessment (Article 11-3 of the Amendment). Furthermore, a new provision has been added requiring that the validity period of the macroprudential stability levy be set by Presidential Decree, not to exceed ten years (Article 11-4 of the Amendment).

Key Practical Issues

• Interpretation of the Scope of Virtual Asset Transfer Services: The Amendment defines virtual asset transfer services as the “transfer of virtual assets between Korea and a foreign country” and “acts that produce substantially the same effect, as prescribed by Presidential Decree.” Given the inherently cross-border nature of virtual asset transactions, the specific transactions subject to registration are expected to be determined through the implementing Presidential Decree. Virtual asset service providers should review their service structures and carefully assess whether registration is required.
• Distinction Between Virtual Asset Transfers and Payments/Receipts: Article 25 of the Amendment expressly distinguishes virtual asset transfers from “payments and receipts” under the Foreign Exchange Transactions Act. As a result, virtual asset transfer activities themselves are unlikely to be subject to the criminal penalty provisions applicable to payment procedure violations. However, as the specific scope of application is expected to be defined in the Presidential Decree and foreign exchange transaction regulations, it will be necessary to monitor developments in subordinate legislation.
• Differentiated Sanctions for Registration and Notification Violations: Failure to register or registration by fraudulent means is subject to criminal penalties, whereas failure to file a change notification or cessation notification for registered matters is subject to an administrative fine of up to KRW 100 million (Article 32(1)(i-2) of the Amendment). As the boundary between the two types of sanctions may give rise to practical disputes, it is advisable to establish a systematic approach to managing post-registration changes.

Implications and Recommended Actions

• Multi-layered Compliance for Virtual Asset Service Providers: Service providers engaged in cross-border virtual asset transfer activities will now be subject to registration, reporting, and data submission obligations under the Foreign Exchange Transactions Act, in addition to their existing obligations under the Act on Reporting and Using Specified Financial Transaction Information (reporting and anti-money laundering requirements) and the Act on the Protection of Virtual Asset Users (user asset protection and abnormal transaction monitoring requirements). A comprehensive redesign of compliance frameworks across multiple regulatory layers will be necessary.
• Managing Interpretation Risks related to the “Improper Purpose” Requirement: The scope of the “intent to unlawfully acquire financial benefits” — a prerequisite for criminal liability for payment procedure violations — is expected to be contested, particularly as to whether it encompasses conduct such as securing ordinary investment returns, minimizing tax burdens, or reducing transaction costs by avoiding reporting obligations. Those engaging in foreign exchange arbitrage transactions or roundabout remittance arrangements involving virtual assets should seek advance legal review of the legality of their transaction structures.
• Engaging in Subordinate Legislation Rulemaking: Key matters — including the detailed scope of virtual asset transfer services, registration requirements, data submission obligations, and transitional measures for existing operators — are to be further specified in the Presidential Decree and subordinate regulations. It is advisable to actively submit comments during the legislative notice period and to assess in advance the impact on business operations.