South Korea to ban credit card purchases of digital assets

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Investors in South Korea will no longer purchase digital assets with their credit cards if a new proposal by the country’s financial services regulator sails through.

The Financial Services Commission (FSC) recommended banning credit card purchases in proposed amendments to the Enforcement Decree of the Credit Specialized Financial Business Act.

“Concerns have been raised about the illegal outflow of domestic funds overseas due to card payments on overseas virtual asset exchanges, money laundering, speculation, and encouragement of speculative activities,” the FSC stated in its proposal.

The regulator called on international brands to cooperate to curb this practice.

In South Korea, investors are expected to trade on local exchanges such as Upbit, Bithumb, and Coinone, where they must register with local bank accounts that bear their real names and are identity-verified.

In turn, the exchanges must partner with a local bank to facilitate withdrawals and deposits for all their clients, a requirement that put some exchanges out of business when it was enforced. The exchanges must also adhere to other stringent regulations, including maintaining $2.3 million in reserves.

The public has until February 13 to give feedback on the new proposal. It will then be reviewed and voted on, with the watchdog pushing to implement it in the first half of the year.

South Korea remains a critical digital asset market despite its woes, such as the collapse of Terra’s LUNA and UST, whose embattled founder, Do Kwon, was born and grew up in the capital, Seoul.

According to CCData, the Korean won overtook the U.S. dollar as the largest fiat trading pair in the digital asset world for the first time last year, accounting for 42.8% of all non-stablecoin trading volume in November.

This continued growth has pushed the FSC to regulate the sector proactively. In December, the watchdog pledged to take innovation more into account when formulating regulations for the industry. Vice Chair Kim So-young noted that regulations must balance fostering innovation and protecting investors.

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