The South Korean government has decided to ease equity capital requirements for fintech companies to offer foreign currency transfer service, aimed to boost bitcoin-mediated foreign currency transfer market.
According to financial industry source on Sunday, the Ministry of Strategy and Finance will ease the equity capital criteria for fintech companies involved in foreign currency transfer service defined in the revised Foreign Exchange Transactions Act from more than 2 billion won ($1.76 million) to 1 billion won, effective on July 18. Small foreign currency transfer agencies whose quarterly foreign currency transfer amounted to less than 15 billion won for the past two consecutive quarters are subject to the deregulation. In February, the ministry revised the bill to allow not only banks but also any types of legal entities registered as a foreign currency transfer agency to conduct such services.
But the revised bill was under criticism because the 2 billion won equity criteria were too high for small fintech companies. About 20 fintech companies are offering foreign currency transfer services using bitcoin in Korea.
Among those that offer bitcoin-mediated foreign currency transfer, no single company meets the 2 billion won equity criteria. But the lowered bar will business of small agencies like Coinplug, Moin and Centbe.
“The new equity capital requirement can be met with a little bit more efforts on previous investments. We will attract additional investors by the end of July to meet the new criteria,” said an executive of an unnamed company.
The biggest advantage of bitcoin-mediated foreign currency transfer is the cheaper and faster remittance. Banks use intermediary banks on the Society for Worldwide Interbank Financial Telecommunication (SWIFT) for foreign currency remittance which takes two to three days and service fees amount to up to 6 percent of total remittances. Given the foreign currency remittance in Korea, commercial banks have raked in some 500 billion won as fee income from foreign currency transfer services each year. In contrast, users are expected to be able to send money to foreign countries on the day using a bitcoin-mediated foreign currency transfer agency with a cheaper fee in the 1 percent range.
By Chung Ji-sung
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