https://www.koreatimes.co.kr/economy/cryptocurrency/20251029/korea-makes-first-legislative-move-to-curb-money-laundering-via-stablecoins

Korea is set to introduce its first legislative measure to bring stablecoins under the Foreign Exchange Transactions Act as part of efforts to block money laundering and tax evasion involving digital assets, National Assembly officials said Tuesday.

Stablecoins are digital currencies designed to maintain consistent value by being tied to central bank-issued currencies, such as the U.S. dollar, or to physical assets like gold. Tether (USDT) and USD Coin (USDC), both pegged one-to-one to the U.S. dollar, are among the most widely-used stablecoins.

According to Assembly officials, Rep. Park Sung-hoon of the main opposition People Power Party plans to propose a bill that classifies stablecoins as a legal “means of payment” under the act, placing them alongside existing instruments, including government-issued notes and banknotes.

Park explained that although stablecoins are gaining recognition as a potential new form of payment, they are not officially recognized under the Foreign Exchange Transactions Act because their characteristics differ from traditional currencies.

“This regulatory gap could enable illegal foreign exchange dealings and tax evasion using stablecoins,” he said. “The bill aims to classify virtual assets pegged to domestic or foreign currencies, which can be used for payments for a broad range of users, as official means of payment under the law.”

The Bank of Korea has raised similar concerns. In a recent written statement submitted to the Assembly, it warned that dollar stablecoins could potentially be used for cross-border currency and capital transactions without complying with the reporting requirements under the Foreign Exchange Transactions Act.

“Currently, dollar stablecoins are circulated in the country, increasing the risk of evading foreign exchange regulations. Stablecoin-driven dollar outflows could also exacerbate volatility in the foreign exchange market,” the central bank said, calling for urgent legislative revisions.

Concerns have grown particularly acute as dollar stablecoin transactions between the Cambodia-based crypto exchange Huione Guarantee and major Korean exchanges have surged in recent months.

Data from the Financial Supervisory Service shows that total coin flows between Huione Guarantee and Korea’s five exchanges, including Upbit and Bithumb, reached 12.8 billion won ($8.9 million) last year, up nearly 1,400 times over the 9.22 million won exchanged in 2023. Nearly all of these transactions — 99.9 percent — were conducted using Tether.

Huione Group, a Phnom Penh-based financial conglomerate, has been sanctioned by the U.S. and U.K. governments for alleged fraud and laundering of stolen funds, and its virtual asset platform, Huione Guarantee, is classified as a high-risk channel for fund transfers.

Financial authorities here are closely monitoring domestic exchanges for potential misuse by criminal groups seeking to launder funds or conduct illegal overseas transfers.

The Ministry of Economy and Finance expressed its support for the bill, saying it agrees on the need to curb unlawful foreign exchange activities involving stablecoins.

The ministry added that it is working with the Financial Services Commission, the Bank of Korea and other relevant authorities to establish detailed regulatory measures for cross-border transactions using stablecoins.