USDT Escrow Payment Agency Agreement Review and Advisory on Payment Structure

Client Information

Corporate / Business Entity

 

Case Details

The client planned to pay development fees to an overseas developer using USDT. Under the proposed structure, the USDT would be transferred to a third-party payment agent, which would convert or liquidate the virtual assets into Korean won and deliver the payment to the developer.

The arrangement was structured as a separate ancillary agreement limited to the custody and payment of funds, rather than as part of the underlying development agreement.

Before entering into the agreement, the client requested a legal review of the payment agent’s regulatory status and the potential risks arising from the conversion and payment process under Korean law.

Decent Law Firm reviewed the agreement with a particular focus on the legal status of the payment agent and the allocation of risks associated with the custody, conversion, and delivery of the funds.


▪️Scope of the Payment Agent’s Role

We examined whether the payment agent’s obligations were clearly limited to holding the funds and converting and transferring them upon satisfaction of the agreed payment conditions.

We also reviewed whether the agreement properly excluded the payment agent from liability for disputes arising under the underlying development agreement.


▪️Potential Classification as a Virtual Asset Service Provider

We reviewed the proposed arrangement in connection with Article 7 of Korea’s Act on Reporting and Using Specified Financial Transaction Information and the Virtual Asset User Protection Act.

Where a business repeatedly or commercially holds, converts, or transfers virtual assets on behalf of third parties, such activities may raise issues concerning registration as a virtual asset service provider.

Accordingly, the payment agent’s actual operating model, transaction frequency, and transaction volume were examined to assess its potential regulatory status.


▪️Allocation of Conversion and Exchange-Rate Risks

We reviewed the contractual provisions governing the conversion rate, applicable fees, exchange-rate calculation method, and the allocation of any shortfall arising during the liquidation process.

The review also covered:

• The liability structure applicable where the payment agent fails to provide timely notice

• The method for calculating the return of deposited funds

• Liability caps for conversion-related shortfalls

• Default interest applicable to delayed payments or refunds


▪️Revision of Contractual Provisions

Based on the review, Decent Law Firm advised the client to include detailed provisions addressing the verification of the payment agent’s regulatory status and the allocation of risks arising from the conversion and payment process.