South Korea Debt Workout Agencies to Review Crypto Holdings Under New Law

South Korea’s debt workout agencies will be allowed to review borrowers’ cryptocurrency holdings when assessing their ability to repay debt.

The Financial Services Commission said on April 23 that the National Assembly passed an amendment to the Credit Information Use and Protection Act that includes the measure, according to Yonhap News Agency.

The amendment adds a special provision on the furnishing of credit information and other data to debt workout agencies. Under the change, the agencies will be able to obtain and use information from relevant institutions on borrowers’ deposits and savings, securities, cryptocurrency holdings, and income and assets.

Under the current law, debt workout agencies have had difficulty checking financial assets or cryptocurrency holdings without a borrower’s consent. They have instead largely relied on real estate or tax data to assess repayment capacity. That led to persistent calls for more sophisticated asset screening to prevent moral hazard.

The FSC said the change is meant to improve fairness between recipients of debt workout support and borrowers who continue to repay in good faith. More precise assessments of repayment capacity should help ensure support goes to people who genuinely need it.

The information sharing will be limited to the minimum necessary scope. Debt workout agencies must notify borrowers individually when their information is accessed and allow them to check the inquiry details themselves.

The special provision will apply for three years from the law’s effective date. The law is expected to take effect in August, three months after promulgation.

"The amendment will allow debt workout agencies to conduct more thorough reviews of repayment capacity," the FSC said. "We will operate the system so benefits reach those who truly need support."