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BOK Governor Rhee Flags Risks of Overseas Crypto Cards Evading Rules, Vows Close Monitoring
Summary
- Rhee Chang-yong, governor of the Bank of Korea, said overseas crypto cards pose several risks in terms of regulatory arbitrage and user protection.
- He said overseas crypto cards carry fees considerably higher than those of conventional payment methods because they involve an additional layer of intermediation.
- He said he would closely monitor the rise in overseas crypto card use because of limited visibility into transaction activity, the potential for customs-duty evasion, and the difficulty of protecting domestic users if issuers go bankrupt or are hacked.
Forecast Trend Report by Period
Rhee Chang-yong, governor of the Bank of Korea, said he will closely monitor concerns that overseas crypto cards could be used to circumvent financial regulations and leave users inadequately protected.
At a parliamentary audit on October 12, Rhee responded to a question from Kim Nam-jun, a lawmaker from the Democratic Party, about the potential for overseas crypto cards to evade regulation. “There are various forms of regulatory arbitrage,” Rhee said. “In particular, crypto card operators are all based overseas and mainly rely on dollar-denominated stablecoins, which creates several risks.”
Crypto cards allow users to make payments with virtual assets such as Bitcoin. When a user pays in crypto, an intermediary converts the assets into fiat currency and pays the merchant. Rhee said that process adds another layer of intermediation and that fees appear to be considerably higher than those of conventional payment methods.
The parliamentary session also raised concerns that while use of overseas crypto cards is increasing, domestic authorities have limited visibility into the transactions. Kim said payments made after users transfer assets to overseas crypto exchanges may not be fully reflected in existing payment and settlement data and cross-border capital flow statistics.
Lawmakers also raised the possibility that crypto cards could be used to avoid customs duties when buying high-priced goods abroad. Kim said online posts are circulating that share ways to use crypto cards to get discounts and avoid tariffs. He also said domestic users may struggle to receive proper protection if overseas card issuers go bankrupt, freeze accounts or are hacked.
Rhee said the central bank will “continue close monitoring, improve information and consult closely with relevant agencies.” His remarks indicate the Bank of Korea plans to examine transaction trends and related risks tied to crypto cards issued by overseas operators and discuss response measures with other authorities.
Suehyeon Lee
shlee@bloomingbit.ioI'm reporter Suehyeon Lee, your Web3 Moderator.