South Korea has decided to remove virtual currencies as a form of donation. Kyunghyang Shinmun reported on May 5 that the Ministry of Public Administration has revised the “Donations Act,” but the amendments will not allow for donation of cryptocurrency. Instead of using crypto currencies such as Bitcoin, from July, South Koreans will have to rely on other freshly approved alternatives to contribute to charities such as department store gift vouchers, stocks, and loyalty points from the internet giant Naver.
This move is made despite the growing popularity of cryptocurrencies in the country. The act, as enacted in 2006, was designed for the quite different technological world, in which there were no smartphones or digital currencies. The new law broadens donation channels by introducing systems of automated response, postal and logistic services in accordance with the technological changes that led to newly created possibilities of donating.
Global crypto donations reach $2 billion, South Korea excluded
The amended Donations Act in South Korea is controversial because it does not mention the digital currencies that are getting more and more popular as a means of donations throughout the world. TheGivingBlock further reports that more than $2 billion worth of donations were done globally via cryptocurrency as of January 2024. Yet, these monies will now be out of the grasp of South Korean charities under the new law.
However, in the US, more than half of charities have started to accept donations in the form of digital assets indicating a more comprehensive attitude towards the integration of new financial technologies in charitable activities. This sharp contrast reveals a regulatory gap that may curtail the range of donations received by South Korean charities, especially from foreign donors who are willing to offer crypto assets.
Regulatory challenges and prospects
The modification of the Donations Act is one of the regulatory changes in relation to the cryptocurrencies in South Korea. The country has made steps to enhance control over the crypto related activities in the recent developments. For example, at the end of April, it was revealed that South Korea intends to promote the temporary crypto crime investigation unit into a permanent department to tackle the augmenting cases of crypto-related crimes and financial fraud.
In addition, global crypto exchanges face challenges in penetrating the South Korea market. A Singapore exchange, Crypto.com, has faced several regulatory issues. The Korean authorities have discovered Anti-Money Laundering (AML) issues with the data provided by the exchange and have started an urgent on-site inspection.
The choice of not including cryptocurrencies as a legitimate means of donation represents a cautious approach as to the regulatory implications towards digital assets since most of them are associated with criminal activities and therefore it is very difficult to monitor and control such transactions. Although the government has allowed donations to be made using local government-issued, KRW-pegged stablecoins and blockchain-issued gift vouchers, the outright bar on other popular cryptocurrencies could dampen the philanthropy landscape in South Korea.
