FinTech firms including bitcoin mediated foreign currency transfer services will be allowed international money transfers for small funds by the South Korean government.
Come August 15, about 40 firms are expected to launch international money transfer services after receiving permits from the Financial Supervisory Service, South Korea’s financial regulator. The permitted amount for a one-off transfer via a FinTech firm will be $3,000 or less. The annual limit for a single account will be capped at $20,000 for transfers through FinTech firms.
As reported in early May, the South Korean government moved to lower the regulatory burden for foreign money transfer startups. There are at least 20 FinTech companies in Korea who use bitcoin for foreign currency transfer services for Korean citizens.
A revision to the Foreign Exchange Transactions Act, which went into effect this month, will see Korean FinTech firms required to hold ₩1 billion (approx. $882,000) in equity capital, against the previous minimum of over ₩2 billion ($1.76 million), to offer foreign currency transfers in Korea. Notably, none of the 20 bitcoin remittance companies were able to meet the earlier criteria.
Traditional bank remittance services, through SWIFT, typically 3-4 business days between payment and settlement and could incur up to 6% of the remittance in fees. While PayPal and other ‘modern’ wire transfer services have significantly faster services with somewhat cheaper fees, a bitcoin-based remittance agency will guarantee same-day foreign transfers with fees at 1% of the transaction or less.
The numerous advantages of bitcoin-based remittance have even led to financial giant Shinhan Bank launching a bitcoin-backed remittance service for the Korea-China corridor in late 2016. A typical transfer will see Shinhan Bank transfer the sender’s transfer value to a digital exchange in Hong Kong where it will be converted to bitcoins. These bitcoins and then sent to a Chinese exchange, where they are to be converted back to Chinese fiat before the recipient receives the funds.