Starting next week, Bitcoin will be on the approved list of technologies that can move payments across the South Korean border. Fintech companies in the country will be able to obtain a permit allowing them to legally offer Bitcoin international transfer services.
New Law Making Bitcoin International Transfers Legal
Starting on July 18, the amended South Korean Foreign Exchange Transactions Act will enable fintech companies to register with the Financial Supervisory Service (FSS) to legally “provide international money transfer services for small funds,” The Herald reported an FSS official saying on Wednesday.
Once registered, companies can use various methods to send money abroad, including using Bitcoin. The amended law specifically permits digital currency remittances, “which were illegal under the Foreign Exchange Transactions law,” wrote online newspaper Dailian.
To obtain a permit, a fintech firm must have a paid-in capital of more than 2 billion won (approx. 1.75 mUSD at the time of writing) and a debt-to-equity ratio of below 200 percent, The Herald explained, adding that:
A one-off transfer via a fintech firm will be limited to $3,000 or less. By an account, an annual limit for international money transfers via fintech firms will be set at $20,000.
New Challenges for Banks
The amended law will allow new entrants to compete with traditional banks, offering money transfer services at a fraction of the incumbents’ fees, with a shorter transfer time.
For an overseas remittance of 1 million won, a typical bank commission is between 50,000 won and 60,000 won, Dailian detailed, adding that fintech companies are expected to charge between 3,000 to 40,000 won. It also takes banks two or three days to complete a transfer, the publication wrote.
Meanwhile, Bitcoin remittance service provider Coinone only charges a 1% commission fee and “deposits are made within 3 minutes after requesting money transfer,” its website shows.
Responding to new fintech competitors, Keb Hana Bank has limited some of its transfer fees to around 10,000 won, and Shinhan Bank is considering the introduction of a Bitcoin-based overseas remittance system, The Herald reported. Kang Mi-jung, a senior researcher at Hana Institute of Finance, commented:
Domestic banks need to find ways to provide remittance services for simple and inexpensive fees, and to establish new profit models through partnerships with fintech.
The worldwide money transfer industry is expected to grow to approximately $600 billion this year, according to research by Infosys. About 40 fintech firms are slated to launch international money transfer services starting on August 15, the news outlet reported FSS officials saying, adding that “the move is expected to intensify competition in the 10 trillion won ($8.7 billion) international money transfer market.”
Do you think Bitcoin remittances will overtake traditional bank transfers? Let us know in the comments section below.
Images courtesy of Shutterstock and Business Korea
Need to calculate your bitcoin holdings? Check our tools section.
Spot-markets for Bitcoin, Bitcoin Cash, Ripple, Litecoin and more. Start your trading here.