The financial authorities plan to respond strictly, seeing concern that a new service allowing the purchase of domestic gift cards with stablecoins issued offshore could be abused for money laundering.
According to materials submitted by Democratic Party of Korea lawmaker Park Sang-hyeok on the 13th, the Financial Intelligence Unit (FIU) under the Financial Services Commission, together with the Financial Supervisory Service, is identifying specific facts such as ▲ the structure of services that purchase domestic gift cards with offshore coins ▲ domestic user pathways ▲ the status of operators.
IQ, a Blockchain corporations, opened a shopping mall and sold mobile gift cards usable at domestic retailers such as Asung Daiso Co. and cosmetics specialty store Olive Young, with payments to be made using its self-issued virtual asset (coin) "KRWQ." KRWQ is a stablecoin pegged 1-to-1 to the won, co-developed by Frax and IQ.
On Web3 services such as Unify and decentralized exchanges (DEX·Decentralized Exchange), users can purchase mobile gift cards usable in Korea using coins from JPYC, an issuer of yen stablecoins.
In the previous month, there was a promotion offering Daiso and Olive Young gift cards at half price when purchased with JPYC. In this process, domestic users also used DragonSwap, which is linked to the kimchi coin Kaia ecosystem. DragonSwap provides a service to exchange the dollar stablecoin "USDT" and JPYC.
Kaia is used for the mainnet infrastructure (infrastructure). DragonSwap charges users fees in the process of exchange between the two stablecoins. DragonSwap is a DEX in the Kaia ecosystem. Users can participate in token swap (Swap·exchange), liquidity provision, and farming (Farming·depositing virtual assets and receiving new virtual assets as rewards).
To operate a business of exchange (including brokerage and intermediation) with virtual assets in Korea, one must file a report with the FIU. A virtual asset handler that does business targeting Koreans without reporting falls under an unreported virtual asset business and an illegal virtual asset handler. Violations are punishable under the Act on Reporting and Using Specified Financial Transaction Information by imprisonment for up to five years or a fine of up to 50 million won.
Promotional activities targeting Koreans on websites guided in Korean or on social media such as Telegram also constitute illegal virtual asset handling business conduct. DragonSwap operated an official community on Telegram, provided customer support along with Korean-language event guidance, but announced last month that it was ending Korean-language services.
The Financial Services Commission (FSC) believes that a structure allowing the purchase and transfer of gift cards that are easy to cash out domestically with virtual assets acquired without customer verification procedures has potential for money laundering abuse. It warned that even offshore operators become subject to the Act on Reporting and Using Specified Financial Transaction Information if they conduct business targeting domestic users.
Authorities will proceed in stages with measures such as data requests, correction requests, and notifications to related agencies according to the results of their own investigation, and plan to respond strictly if violations are confirmed. The Financial Services Commission (FSC) is also reviewing the establishment of regulatory grounds related to stablecoin issuance regulation and offshore distribution conduct during the phase-two legislation discussions on virtual assets.
Lawmaker Park Sang-hyeok said, "As a detour enabling virtual assets to be exchanged into cash without customer verification procedures has been identified, thorough monitoring is needed. It is also necessary to establish systems to issue, distribute, and use virtual assets transparently and safely."