The Republic of Korea has announced a partial amendment to the ED of the Credit-Specialized Financial Business Act. The amendment is currently open to opinions from all organizations and individuals. The objective of making amendments is to diversify the financing methods of credit finance companies.
The first point highlighted in the announcement pertains to the scope of prohibited credit card payments.
This comes to light after several concerns were raised about the illegal outflow of funds. Authorities have observed the said flow via virtual asset exchanges accepting credit cards. They have also been charged with breaking anti-money laundering laws. Korean authorities are hopeful that amendments will help them strengthen relations with international brands.
They have said in the announcement that cooperation with them will be established by preventing the illegal flow of funds to foreign countries and preventing money laundering.
The amendments highlight the increase in the usage limit for prepaid cards. The limit is currently set at 500,000 SK won. It has been working till now, but there is a need to increase the limit, considering there is an increase in the unit price of children’s meal payments. The Child Welfare Act covers that.
It is proposed that the limit be raised to 1 million SK won. This is expected to resolve the issue of inconveniences that are caused when there is an excess over the set limit.
Economic benefits are expected to be provided per the new limit proposed. Currently, the limit is 1005 of the annual fees for online and 10% for offline. The revised amendment bridges this gap and sets aside the mode. Thereby, bringing a stable percentage of benefits. No matter the recruitment method, the limit on economic benefits will be set at 100% of the annual fees.
Lastly, authorities have sought opinions on diversifying funding methods for credit finance companies. Assets for scrutiny are restricted to assets that are related to the business, like installments and leases. The revision brings solutions to resolve the difficulties in financing credit companies. Diversified methods include asset securitization of rental assets.
All the pieces of opinion have to be submitted to the Chairman of the Financial Services Commission. They have to be in writing with an expression either in favor of or against the amendments.
A key highlight is that South Korea has suggested a ban on buying cryptocurrencies via credit cards. The concerns are about the outflow of funds to escape from the radar of authorities who are tasked with identifying AML-related activities. The rules are likely to be different for domestic and international exchanges.
The core focus is on improving transparency and regulation around cryptocurrency and the credit business in South Korea. Local firms are required to disclose information about their holdings, equities, and business models that they follow.
More developments are expected to be announced as the South Korean authorities receive opinions and work to improve the amendments.