Obtaining a Crypto License in South Korea: A Comprehensive Guide

05.07.2023

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Cryptocurrencies and blockchain technologies have gained significant prominence in the modern global landscape, captivating the attention of entrepreneurs and investors alike. South Korea, a trailblazer in the realm of cryptocurrencies, has instituted a framework for the regulation and licensing of cryptocurrency companies to ensure operational safety, legality, and transparency. In this article, we will discuss the acquiring a crypto license in South Korea, encompassing preparatory measures, requisite documentation, tax obligations, and an overview of license categories.

Initiating the process of obtaining a crypto license in South Korea

Begin by determining the specific cryptocurrency activity you intend to undertake, such as exchange services, storage, or payment solutions.

Study the South Korean laws and regulations pertaining to cryptocurrencies and blockchain. This is particularly crucial if your venture involves establishing a crypto fund.
Develop a detailed business plan outlining your crypto exchange strategy, developmental roadmap, business model, and projected financial performance. Specify your goals and provide a comprehensive description of your cryptocurrency platform or service.
Align your company with local and international legal regulations concerning cryptocurrencies, including compliance with anti-money laundering (AML) and counter-terrorist financing (CTF) protocols.
Build a team of experts, including legal professionals, finance experts, and other specialists to ensure your company is legally and financially prepared, if you are planning to establish a crypto exchange.

These preparatory endeavors significantly contribute to a successful crypto license acquisition process, aiding in the alignment with regulatory mandates and legal obligations of the country.

Requirements for obtaining a license in South Korea: documents & info vetting

License Application:

The initial step involves submitting an application for a crypto license. This application should include foundational information about your company, the purpose of license acquisition, and a concise description of the proposed cryptocurrency activities.

Company Founding Documents:

Attach copies of crucial founding documents, including the memorandum of association, articles of association, and pertinent registration papers.

Comprehensive Business Plan:

Furnish an intricate business plan delineating the cryptocurrency activities you intend to undertake within South Korea. This should encompass financial projections, risk mitigation strategies, developmental trajectories, and measures for managing potential risks.

Financial Strength Verification:

Provide financial statements, bank records, and other documentation substantiating the financial solvency of your company. This could involve balance sheets, income statements, and forward-looking financial projections.

Founder and Executive Profiles:

Offer copies of passports and comprehensive CVs of founders and senior executives. These profiles should highlight their qualifications and experience within the cryptocurrency realm.

Clear Criminal Record Certificates:

Supply certificates of no criminal record for founders and senior executives, affirming their reputability.

Partner Contracts (if applicable):

If your company has pre-existing partnerships, furnish copies of contracts to substantiate business activities and collaborations.

Oversight of сryptocurrency сompanies in South Korea

Cryptocurrency companies operating in South Korea are subject to regulation by the Financial Services Commission (FSC). The FSC stands as the principal regulatory authority entrusted with the oversight of cryptocurrency enterprises in the country. Its mandate encompasses a range of pivotal functions, including licensing and regulation of cryptocurrency activities, ensuring adherence to cryptocurrency-related legislation, and safeguarding the interests of investors and consumers.

The FSC plays a pivotal role in establishing the legal and regulatory landscape for the cryptocurrency sector's growth in South Korea. It formulates and implements regulations delineating the conditions and requisites for obtaining crypto licenses. Additionally, the FSC prescribes rules and standards governing the operations of cryptocurrency companies. The regulator conducts audits to ascertain compliance with regulatory stipulations.

A fundamental objective of the FSC is to guarantee the security and stability of the cryptocurrency market. The organization undertakes measures to preempt fraud, financial misconduct, and the laundering of illicit proceeds through cryptocurrency transactions. Moreover, it diligently monitors the protection of consumer and investor rights, ensuring the transparency and credibility of cryptocurrency-related activities. Consequently, securing approval from the FSC is imperative for the establishment of a crypto exchange in South Korea.

With the FSC, other regulatory bodies involved in overseeing cryptocurrency enterprises in South Korea encompass the Korea Financial Intelligence Unit (KOFIU) and the Central Bank of South Korea (Bank of Korea). Each of these entities carries out distinct functions within the framework of cryptocurrency sector regulation, collaborating with the FSC to bolster the stability and advancement of the country's cryptocurrency market.

Taxation for cryptocurrency operations in South Korea

Companies to provide a crypto exchange in South Korea are obligated to fulfill various tax requirements, including:

Income Tax: Cryptocurrency organizations are subject to income tax rates ranging from 9% to 24%. This tax is levied on the profits garnered from the organization's activities.
Value Added Tax (VAT): South Korea imposes a standard VAT rate of 10%. VAT may apply to specific cryptocurrency transactions, such as the sale of goods or provision of services.
Investment Tax: Investment tax is applicable to the sale of cryptocurrency assets. The tax rate hinges on asset type and ownership duration. Short-term investments may incur higher rates than long-term ones. The average investment tax rate is around 20%.
Dividend Tax: Dividend tax pertains to distributed dividends. The tax rate varies based on the tax status of individual or corporate taxpayers. Distinct categories of taxpayers may face divergent tax rates on dividends. The average dividend tax rate stands at 15.4%.

YB Case experts help to stay abreast of tax legislative updates, if you want to establish crypto funds in South Korea. This proactive approach ensures compliance with requirements and accurate fulfillment of tax obligations.

Timeline for obtaining a crypto license in South Korea

Acquiring a crypto license in South Korea involves a substantial investment of time, typically spanning from 6 to 12 months. The exact duration is contingent upon various factors, encompassing the intricacy of the application, the degree of alignment with regulatory prerequisites, and the prevailing workload of the regulatory entity.
The application process for a crypto license entails the submission of requisite documentation, undergoing diverse assessments, and undergoing review by the regulatory body. Throughout this process, additional documentation or information may be requested to substantiate the company's compliance with regulatory mandates.

It's vital to acknowledge that regulators, such as the Financial Services Commission, manage a multitude of financial entities, which can influence the processing and evaluation of crypto license applications. To expedite this process, prudent measures involve meticulous documentation preparation, accurate completion of the application, and proactive engagement with the regulatory body to clarify requisites and procedures. These actions mitigate the risk of delays and supplementary information requests.

Conclusion

Obtaining a crypto license is a prerequisite for cryptocurrency business in South Korea. It authorizes companies to engage in cryptocurrency transactions within legal bounds, ensuring adherence to legislation and regulatory mandates.

While the endeavor of securing a crypto license might entail a substantial time investment, preliminary documentation preparation, regulatory compliance, and proactive engagement with regulatory bodies expedite this process.

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