South Korean cryptocurrency exchanges are growing frustrated as a rule requiring them to report cross-border transfers of digital assets to the Bank of Korea takes effect in little more than a month. The industry says the government is tightening regulation while applying inconsistent standards, with no Digital Asset Framework Act in place to define the legal status of cryptocurrencies or set rules for the industry as a whole.
Domestic exchanges have begun preparing to report cross-border crypto transfers under the revised Foreign Exchange Transactions Act, which takes effect on Dec. 3, financial industry sources said on the 25th. Under a reporting manual for virtual asset transfer operators that the central bank issued last month, exchanges must report the type and quantity of cryptocurrency moved to overseas exchanges and private wallets, along with transaction values and information on senders and recipients. Month-end balances held by customers with a history of overseas transfers are also subject to reporting.
Industry officials argue the sequence is backwards: expanding surveillance and tax obligations before properly establishing the legal status of cryptocurrencies or rules for different transaction types. The current Virtual Asset User Protection Act defines cryptocurrency as a certificate with economic value that can be traded or transferred electronically, but comprehensive rules on its standing as a financial asset or payment instrument, and on issuance and circulation, remain underdeveloped.
The effect is to impose reporting duties comparable to those for foreign exchange transactions on cross-border transfers, even though the legal character of cryptocurrency has yet to be settled. On taxation, meanwhile, authorities have treated cryptocurrencies including stablecoins as distinct from foreign currency, classifying income from their transfer or lending as other income and pushing to levy taxes on it. That inconsistency is behind complaints that regulation is expanding without a coherent standard for what cryptocurrency legally is.
Exchanges also say the new reporting duty carries a heavy administrative burden. According to industry officials, exchanges are building a system under which they will extract cross-border transfer data and submit it to the Digital Asset eXchange Alliance (DAXA), which will compile the information and pass it to the central bank.
"Multiple agencies already request data from us on a regular basis, and adding this new reporting work is putting an excessive strain on staff," an official at one cryptocurrency exchange said. "DAXA has no in-house development team either, so it has to build the system through an outside vendor, and we are concerned about whether it will be ready in time for the start date."
An official at another exchange said extracting the required data is not technically difficult. "But talks with the Bank of Korea are still under way over issues such as personal data protection in submitting past transaction records going back to 2024, so the reporting standards could change," the official said. "We can only adjust once the final version is confirmed."