When purchasing stocks with tokens, what is the obligation to report under the Foreign Exchange Transactions Act?

Law firm Veat received a request from domestic corporation A (hereinafter referred to as “client”) regarding a review of whether foreign exchange reporting is required when a foreign corporation pays and purchases shares of the domestic corporation in the form of tokens.

The Foreign Exchange Transaction Act manages the flow of capital by requiring foreign exchange reporting when foreigners and foreign corporations acquire domestic assets. A non-resident acquiring securities, including stocks, in Korea requires a securities acquisition report to ensure that the inflow and transaction of foreign capital are properly managed and regulated. Regulations are evolving to include not only physical assets such as stocks and real estate, but also digital assets.

When a foreign corporation acquires shares from a domestic resident, the acquisition of securities by a non-resident is, in principle, a subject for securities acquisition reporting under the Foreign Exchange Transaction Act. Therefore, when a foreign corporation purchases shares from a Korean resident, that transaction must be reported to the relevant authorities under the Foreign Exchange Transaction Act.

However, it is necessary to confirm whether foreign exchange reporting is required even when paying a new type of digital asset, 'tokens,' as consideration. Tokens are a type of digital asset based on blockchain technology and are a kind of cryptocurrency or digital right that can perform various functions. Tokens are mainly issued on blockchain networks, and their value and purpose vary depending on the purpose of issuance. Tokens have characteristics different from traditional currencies or securities, which may make the scope of application of the Foreign Exchange Transaction Act unclear.

Law firm Veat comprehensively analyzed whether the transaction is subject to securities acquisition reporting under the Foreign Exchange Transaction Act, considering the specificity of tokens different from existing assets and confirming the matters with the relevant ministry.

The Law firm Veat Foreign Exchange Reporting Center provides one-stop services for the entire process from report preparation to submission to the relevant authorities for various types of foreign exchange transactions that require reporting. If you have any difficulties with foreign exchange reporting, please feel free to contact [Law firm Veat Foreign Exchange Reporting Center].

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Law firm Veat