South Korea Regulators Propose Ban on Crypto Purchases Using Credit Cards

2024-01-17, 08:23

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## TL; DR

South Korea has proposed a ban on using credit cards to buy cryptocurrency.

Currently, the Korean government awaits feedback from the public on the proposed law.

Crypto traders can use credit cards to buy cryptocurrency at Gate.io.

## Introduction

The list of countries that are crafting crypto legislation is growing. South Korea is one of the latest countries to propose regulations for the crypto sector, amid several concerns including externalization of funds. This article will look at South Korea’s proposed crypto regulations. We shall also discuss the benefits of using the Gate Card.

## FSC Advocates for Credit Card Ban when Buying Cryptocurrency

South Korea, a country with many crypto investors, has joined a community of nations that intends to introduce cryptocurrency laws to regulate digital assets.

On 4 January 2024, the South Korean government through the [Financial Services Commission (FSC)](https://www.fsc.go.kr/po040301/view?noticeId=3954&curPage=&srchKey=&srchText=&srchBeginDt=&srchEndDt= "Financial Services Commission (FSC)"), announced its intention to amend the Enforcement Decree of the Credit Specialized Financial Business Act. In the communique it announced that it aims “to diversify the financing methods of credit finance companies.”

First, the South Korea's Financial Services Commission (FSC) has crafted regulations to ban the use of credit cards to buy crypto. The official reason for banning the use of credit cards to purchase crypto is [to prevent the “illegal outflow of domestic funds overseas](https://www.fsc.go.kr/po040301/view?noticeId=3954&curPage=&srchKey=&srchText=&srchBeginDt=&srchEndDt= "to prevent the “illegal outflow of domestic funds overseas") due to card payments on overseas virtual asset exchanges."

Read also: [South Korea’s Crypto: Gaming Reigns Supreme in the World of Web3 Amidst the Terra Controversy](https://www.gate.io/blog_detail/3246/south-korea-crypto-gaming "South Korea’s Crypto: Gaming Reigns Supreme in the World of Web3 Amidst the Terra Controversy")

By preventing people from buying cryptocurrency using credit cards, the government also aims to prevent money laundering. However, the proposed crypto regulation in Korea will undergo a review and voting process before being implemented. As a result, South Korean citizens have up to 13 February 2024 to give their feedback.

Concerning this, [the FSC said](https://www.fsc.go.kr/po040301/view?noticeId=3954&curPage=&srchKey=&srchText=&srchBeginDt=&srchEndDt= "the FSC said"), “Organizations or individuals who have opinions on this amendment may submit their opinions online through the Center for Participatory Legislation by February 13, 2024. Please submit your written opinion to the Chairman of the Financial Services Commission.”

The FSC aims to put various regulatory measures to protect cryptocurrency exchange users. One of the proposed pieces of regulation mandates cryptocurrency exchanges to store 80% of the customers’ crypto assets in cold storage to reduce hacking incidents. Nonetheless, the country also aims to ensure that the crypto in Korea sector remains vibrant and innovative by using crypto-friendly regulation.

## South Korea Aims to Bad Crypto Incidents

During the past two years South Korea experienced several bad crypto incidents which has forced the government to institute regulatory measures to protect the citizens.

In May 2022, for example, TerraUST, the algorithmic stablecoin  and LUNA, its sister token, imploded resulting in loss of over $40 billion of investor funds within a single day. Significantly, these two cryptocurrencies [belonged to Terraform Labs](https://www.gate.io/blog_detail/1191/the-current-investigations-on-terraform-labs-and-founder-do-kwon-following-luna-ust-crash "belonged to Terraform Labs"), a South Korean-based firm.

A few months later there was another crypto debacle when Wemade, based in South Korea, expanded its distribution of Wemix, a utility token in the Mir 4 blockchain game.

In response, several local exchanges formed the Digital Asset Exchange Alliance (DAXA) to delist Wemix. However, Wemade filed a lawsuit for unfair competition. But, Bithumb, a member of DAXA, won the case.

These two major bad incidents that occurred in South Korea and others that took place in other regions of the world [like the FTX collapse](https://www.gate.io/blog_detail/1806/el-colapso-de-ftx-afect%C3%B3-a-una-amplia-secci%C3%B3n-del-cripto-ecosistema "like the FTX collapse") have forced the Korean government to bring sanity in the crypto sector. For instance, the government aims to find ways for investors to purchase crypto safely. However, it has non intention to crypto ban digital assets. 
By banning the purchasing of cryptocurrency using credit cards the government has limited its people from using foreign crypto exchanges. This enables it to monitor the trading behaviour of its citizens, the performance of local crypto exchanges as well as control money flows.

Read also: [South Korea Increases Crypto Investigations And Regulations](https://www.gate.io/blog_detail/1359/south-korea-increases-crypto-investigations-and-regulations "South Korea Increases Crypto Investigations And Regulations")

In addition, the government has called on its residents to report unlicensed exchanges operating in the country. However, since cryptocurrencies are borderless the Korean crypto investors and traders may find a way to deal with the emerging situation.

It is unlikely that cryptocurrency in Korea will be affected significantly by the crypto ban on the use of credit cards. This is because there are many exchanges in Korea like Korbit, Hanbitco, Coinone and GOPAX for buying crypto.

## Other Proposed Crypto Regulations in South Korea

The above mentioned crypto in Korea piece of legislation is not exhaustive. Still, the government is working on other measures to regulate the sector.

In fact, it has already introduced several pieces of relevant legislation. First, in 2018 the government introduced regulations requiring Korean crypto investors to use their real names when registering with local exchanges. More importantly, these details should be verified by South Korean banks.

Again, it is proposing that the exchanges should separate its funds from that of its customers. In addition, they should deposit the customer funds with credible financial institutions.

The VASPs should also be liable for bad events like hacking or computer failures. Some of these provisions will become effective after getting feedback from the citizens and after full evaluation of the details by various sectors of the society.

## Benefits of Using Gate Card

Recently, Gate.io launched its debit crypto card which enables its holders to carry out various transactions in a convenient manner. For example, it enables the holders to make transactions on over 70 million merchants around the globe. That card supports major cryptocurrencies including USDT, Bitcoin and Ether (ETH).

Another interesting fact [about the Gate Card](https://www.gate.io/card "about the Gate Card") is that the users can top up their cards with fiat currency which is then converted to cryptocurrencies. As you note, the Gate card works like traditional debit cards we use to purchase goods and services.

## How to Buy Cryptocurrency with a Credit Card on Gate.io

Since it is still permissible for South Koreans to [buy crypto using credit cards](https://www.gate.io/buy_crypto "buy crypto using credit cards"), let’s explain how they can do so on Gate.io exchange. If you want to buy crypto using a credit card, you should open and verify an account on the platform.

Once you have done so, you click "[Buy Crypto - Credit Card](https://www.gate.io/crypto/buy?fiat=USD&crypto=USDT "Buy Crypto - Credit Card")” on Gate.io homepage. Next, you select the fiat currency you want to use to buy the cryptocurrency and indicate the exact amount to use. From there, you choose a payment channel like Banxa.

After reading the disclaimer and clicking “Continue” you will be directed to the third party to complete the payment. On the third party you will create the order, submit verification and fill the card details. With that you are done as the order is completed.

## Conclusion

South Korea has proposed a crypto ban on using credit cards to purchase digital assets like cryptocurrencies. By doing this, the government aims to curb the externalization of funds and money laundering. Nonetheless, before the proposed law comes into effect Koreans can purchase cryptocurrencies using credit cards.

## FAQs about Cryptocurrency in South Korea

### Is Gate.io legal in South Korea?

Gate.io is legal in South Korea as its citizens can freely buy, hold and sell cryptocurrencies on its platform. South Korean residents can purchase crypto on Gate.io using debit/credit cards.

### Is cryptocurrency legal in South Korea?
Cryptocurrency is legal in South Korea as its citizens can buy, hold, trade and sell them. However, the Korean government is in the process of establishing crypto regulations to protect investors and promote innovation in the sector.

### Which crypto is popular in Korea?
Bitcoin is the most popular cryptocurrency in South Korea. Globally, South Korea is the second country with the largest <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> trading volume. The United States is the number one country in terms of bitcoin trading.

### Is South Korea crypto tax free?
Currently, there is no tax on crypto earnings in South Korea. However, the government plans to introduce a 20% tax on crypto earning amounting to $187 or more starting in 2025.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>