FSC Flags Money Laundering Risk in KRWQ Gift Certificate Service

South Korea's financial authorities said they will "respond firmly" to a service that lets users buy gift cards with KRWQ, an offshore won-pegged stablecoin, belatedly acknowledging money laundering risks first reported by The Seoul Economic Daily.

The Korea Financial Intelligence Unit (KoFIU), under the Financial Services Commission (FSC), is working with the Financial Supervisory Service to examine the structure of the offshore won coin service, how it is accessed in Korea and the operators involved, according to the office of Rep. Park Sang-hyuk of the Democratic Party of Korea, a member of the National Assembly's National Policy Committee, on the 13th.

IQ, an overseas blockchain company, launched "KRWQ Gifts," which allows users to buy mobile gift cards from Korean retailers with the KRWQ stablecoin. The service exchanges KRWQ for gift cards usable at about 90 domestic brands including Olive Young, Daiso and Paris Baguette.

First issued in October last year, KRWQ is designed to hold its value at 1 won per coin. As a de facto won stablecoin, it can be used to buy gift cards through decentralized exchanges (DEX) without any separate know-your-customer (KYC) checks, drawing scrutiny as a channel for money laundering. Concerns have been particularly loud that large-scale laundering could occur if the service expands into game payments. "A service that issues an offshore won coin like KRWQ and lets you buy gift cards with it is quite dangerous," a financial industry official said. "It could be abused for laundering drug money and criminal proceeds. This is not a problem to take lightly."

According to Park's office, the FSC also acknowledged that a structure allowing users to buy and transfer gift cards — easily converted to cash in Korea — with virtual assets obtained without customer verification could be exploited for money laundering. The commission said authorities take the matter seriously and warned that offshore operators soliciting Korean users fall under the Act on Reporting and Using Specified Financial Transaction Information.

Depending on the findings of their own review, authorities plan to demand documents, request corrective measures and notify relevant agencies. They intend to respond firmly if violations are confirmed. "The KoFIU is understood to have pressed the KRWQ issuer hard, essentially asking whether it has any intention of complying with regulations," a virtual asset industry official said. "I understand the company has also begun responding, including considering hiring a law firm."

The FSC stressed that limits on enforcing rules against offshore virtual asset service providers are a problem major countries face in common. The regulator's position is to pursue institutional improvements alongside international cooperation.

The FSC is also reviewing grounds for regulating stablecoin issuance and offshore circulation as part of discussions on second-stage virtual asset legislation. "Now that a bypass route for converting digital assets into cash without customer verification has been confirmed, it must be monitored thoroughly," Park said. "We also need a framework for issuing, circulating and using digital assets transparently and safely." ▷See the Seoul Economic Daily report of Aug. 24 (print edition, page 9)