The South Korean government is working on lowering the equity capital requirement for fintech companies offering foreign exchange (FX) transfer services, including those using bitcoin for remittances. With the aim “to boost Bitcoin-mediated foreign currency transfer market,” the change will be effective on June 18, according to South Korea’s leading daily business newspaper.
Maeil Business Newspaper’s English language website, Pulse News, reported this week that the South Korean Ministry of Strategy and Finance has decided to lower the equity capital requirement for fintech companies offering FX transfer services.
Effective on July 18, the capital requirement will be reduced from 2 billion KRW to 1 billion KRW (approx. 900,000 USD, at press time).
The current 2 billion won requirement is outlined in the revised Foreign Exchange Transactions Act, which the ministry detailed in February. The aim of this revised act is to provide standards for small companies offering cross-border remittance services. However, this bill has been heavily criticized because the 2 billion won equity criteria is considered too high for most small fintech firms.
Since the law concerns foreign currency transfers, only bitcoin remittance service providers are affected, according to leading South Korean Bitcoin wallet provider and exchange Coinplug. These companies are included in the law because they accept Korean won and deliver funds in a foreign currency at the destination, the company told Bitcoin.com. Pulse News refers to this set up as “Bitcoin-mediated foreign currency transfer.”
Coinplug also confirmed that Bitcoin remittance businesses currently have to qualify for the 2 billion KRW capital requirement, which is expected to be lowered to 1 billion KRW. However, this law “does not effect Coinplug,” the company claims, adding that “We meet the requirement.”
Overall, the company believes that the lower equity capital requirement will likely attract more fintech and Bitcoin companies to the market.
“The biggest advantage of Bitcoin-mediated foreign currency transfer is the cheaper and faster remittance,” Pulse News wrote. Currently, banks use the SWIFT network for FX transfers which takes two to three days and can cost up to 6 percent of total remittances, the publication conveyed. In addition, “Commercial banks have raked in some 500 billion won as fee income from foreign currency transfer services each year.” Bitcoin remittances, on the other hand, can be done on the same day for about 1 percent fee, Pulse News concluded.
The Korean won is currently the fourth most traded bitcoin market. In an interview with Bitcoin.com in January, Korbit CEO Tony Lyu talked about the growing popularity of using Bitcoin for international remittances in South Korea. The CEO of the second-largest bitcoin exchange by volume in the country said:
Remittance companies are also using bitcoin in the back-end of their services. So, many customers in Korea are using bitcoin and benefiting from it without even being aware of it.
What do you think of South Korea the lowering capital requirement? Let us know in the comments section below.
Images courtesy of Shutterstock, Coinplug, SWIFT, and South Korean government
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