South Korean Government Revamps Foreign Currency Requirements
The South Korean Ministry of Strategy and Finance has decided to lower capital requirements for FinTech companies offering foreign currency exchange services as defined under the Foreign Exchange Transactions Act. Effective July 18, FinTech companies that offer such services will be required to hold one billion won as opposed to the requirement of two billion won ($1.76 million). Smaller foreign currency transfer agencies with less than 15 billion won in transfers for the past two quarters qualify as well.
According to Korean business news publication Pulse, the amendment was made to allow smaller businesses to enter the South Korean remittance market.
In February, the South Korean government announced new requirements for institutions registering as foreign currency transfer agencies. Along with a new total debt-to-equity capital ratio, computing facilities prerequisites, and requirements for anti-money laundering procedures, the bill also introduced the stringent two billion won criteria.
Although the revised bill would allow any type of legal entity to register to offer such services, the two billion won equity capital requirement was criticized for being too high for small FinTech companies. Approximately 20 FinTech companies currently offer foreign currency transfer services using Bitcoin in South Korea, but none of them meet the two billion won equity requirement.
Banks currently use intermediary banks on the Society for Worldwide Interbank Financial Telecommunication to make foreign currency remittances, which process can take up to two to three days and incur service fees of up to six percent. However, using Bitcoin-enabled foreign currency transfer systems, users can send money the same day internationally with fees as low as one percent.