Korean government’s latest cryptocurrency clampdown following a big tax plan: Ban cross trading and fine employees who trading
According to a report from local media outlet Yonhap News Agency on June 7, South Korea’s Financial Services Commission has ordered a ban on cross-trading on cryptocurrency exchanges in the country. Furthermore, South Korea is also moving forward with a plan to fine $90,000 for crypto exchange operators and employees if caught trading on their own exchange.
South Korean government’s latest crypto crackdown after a massive tax plan
South Korean authorities have announced a new cryptocurrency tax scheme that targets overseas digital assets holdings. According to the country’s National Tax Service, starting 2022, residents with foreign crypto exchange accounts may be compelled to report the holdings for balances in excess of $447,900.
The new law comes into effect on January 1, 2022, but the tax reporting will begin in June 2023. Failure to report the crypto holding attracts a fine of between 10% – 20% of the amount not reported or unreported.
After this news emerged, Korean traders were still not calm when it was reported that the government in South Korea was considering a proposal to penalize employees of cryptocurrency exchanges for trading cryptocurrency.
Furthermore, the fine is up to $90,000. It appears that the move follows a May 28 announcement by the government announcing that it will ban businesses, executives, and employees from trading virtual assets through their own exchanges.
South Korea has moved to ban cross trading on cryptocurrency exchanges in the country
Accordingly, to prevent offsetting buy and sell orders for the same asset (at the same price) without recording the transaction on the order book, South Korea’s Financial Services Commission has banned cross trading on cryptocurrency exchanges in the country. The move is part of a raft of amendments to the country’s Act on the Reporting and Use of Certain Financial Transaction Information.
Exchanges in South Korea reportedly cross-trade to enable them to convert fees charged in crypto to Korean won (KRW).
Commenting on the practice, an industry official told Newsis:
“In order to convert the cryptocurrency received as a fee into KRW, you have no choice but to sell the cryptocurrency at your place of business.”
At the end of May, South Korea’s central bank expressed the usual concerns and clear warnings that trading cryptocurrencies could put the country’s entire financial system at risk. This is not surprising given that most central banks are wary of the growing prevalence of a financial vehicle over which they cannot control.
The new law that will force crypto exchanges to work with banks to ensure legitimacy and provide mandatory know-your-customer (KYC) requirements will go into effect later this year.
Many crypto exchanges operating in the country are struggling to meet these growing demands from regulators. The once-crypto-friendly country appears to be taking a harsher approach to digital assets despite huge demand for them from Korean traders and investors.
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