Simon Ng Authorities in South Korea are intensifying their scrutiny of unregulated over-the-counter (OTC) cryptocurrency trading and deposit platforms. At the third annual conference of prosecutors, official representatives recommended bolstering oversight within the cryptocurrency sector, pinpointing the role of these unregulated businesses in enabling money laundering and fraudulent activities. According to the Korea Customs Service, illegal transactions in the cryptocurrency space reached an estimated 5.6 trillion won (approximately $4 billion) during the year 2022.
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Regulatory Spotlight on Unregulated Cryptocurrency OTC Businesses in South Korea
A recent regional report released on a Sunday states that South Korean regulatory bodies are increasingly concentrating on the cryptocurrency OTC market. OTC trading essentially entails the immediate transfer of assets—like stocks, bonds, or cryptocurrencies—between two parties, bypassing formal exchanges. Unlike assets exchanged on regulated platforms, OTC transactions do not come with the same level of disclosure requirements.
The report indicates that illegitimate virtual currency OTC firms often operate through foreign corporate entities and specialize in converting unlawfully obtained virtual currencies into Korean won or other foreign currencies. “There exists a compelling requirement to supervise these firms as unregistered virtual asset trading entities,” the report states.
Deputy Chief Prosecutor Ki No-Seong, along with Park Min-woo of the Financial Services Commission, stressed the importance of focusing regulatory efforts on the unregulated OTC sector within the digital currency arena. The report also points out that while well-known South Korean exchange Upbit lists a total of 192 cryptocurrencies, some OTC platforms provide access to more than 700 different types of cryptocurrencies. The author of the report argues that such OTC businesses operate akin to a “shadow economy.”
The report further investigates the activities of three individuals who were arrested for using OTC platforms to obtain 94 billion won (approximately $78.96 million) in digital currencies. These transactions were allegedly executed “on behalf of Libyan entities and subsequently transferred to South Korea for liquidation into fiat currency,” the report states. It emphatically argues that there is an absence of precise regulatory frameworks aimed at overseeing the OTC segment within South Korea.
Gong Byeong-seon, a reporter for a local daily, disclosed that under Article 10 of the Specific Financial Information Act, domestic virtual asset firms are currently prohibited from engaging in virtual currency transactions via OTC platforms. However, it is crucial to underscore that individual investors are only subject to penalties for illegal foreign exchange activities if they transgress the provisions of the Foreign Exchange Transaction Act.
What are your perspectives on South Korean authorities targeting cryptocurrency-centric OTC trading platforms? Your insights and opinions on this topic would be highly valuable in the comment section below.
Frequently Asked Questions (FAQs) about South Korean Cryptocurrency Regulation
What is the primary concern of South Korean authorities regarding OTC cryptocurrency trading?
The primary concern of South Korean authorities is that unregulated over-the-counter (OTC) cryptocurrency trading platforms may facilitate money laundering and fraudulent activities. Officials have emphasized the need for enhanced regulatory measures to oversee these platforms.
How much illegal cryptocurrency activity is estimated to have occurred in South Korea in 2022?
According to the Korea Customs Service, an estimated 5.6 trillion won (approximately $4 billion) worth of illegal cryptocurrency transactions took place in South Korea during the year 2022.
What is Over-The-Counter (OTC) cryptocurrency trading?
Over-the-counter (OTC) cryptocurrency trading involves the direct buying and selling of cryptocurrencies between two parties, bypassing a formal exchange. Unlike assets traded on regulated platforms, OTC transactions do not have the same disclosure requirements.
Who emphasized the need for regulatory attention on unregulated OTC platforms?
Deputy Chief Prosecutor Ki No-Seong and Park Min-woo of the Financial Services Commission stressed the importance of focusing regulatory efforts on the unregulated OTC market within the digital currency arena.
What existing laws impact virtual asset transactions through OTC firms in South Korea?
Under Article 10 of the Specific Financial Information Act, domestic virtual asset businesses in South Korea are currently prohibited from engaging in virtual currency transactions via OTC platforms. Additionally, individual investors can face penalties for illegal foreign exchange activities under the Foreign Exchange Transaction Act.
How many types of cryptocurrencies do some unregulated OTC platforms offer compared to regulated exchanges?
While well-known South Korean exchange Upbit lists a total of 192 cryptocurrencies, some unregulated OTC platforms provide access to more than 700 different types of cryptocurrencies.
What did the report say about the individuals who were arrested for using OTC platforms?
The report investigates the activities of three individuals who were arrested for using OTC platforms to obtain 94 billion won (approximately $78.96 million) in digital currencies. These transactions were allegedly executed on behalf of Libyan entities and then transferred to South Korea for liquidation into fiat currency.
More about South Korean Cryptocurrency Regulation
- South Korean Authorities’ Focus on Cryptocurrency Regulations
- The Third Annual Prosecutors’ Conference in South Korea
- Korea Customs Service Report on Illegal Crypto Activities
- Specific Financial Information Act of South Korea
- Foreign Exchange Transaction Act in South Korea
- Upbit Cryptocurrency Exchange
- Regional Report on South Korean Crypto OTC Trading
5 comments
192 vs 700 types of cryptocurrencies? that’s insane! OTC markets seem like the wild west of crypto.
Regulatory focus is important but what about individual investors? They get caught in the crossfire sometimes.
It’s interesting to see the focus on OTC platforms. Traditional finance has always had OTC markets but the crypto world is a whole new beast.
Wow, 5.6 trillion won in illegal activities? Thats huge. South Korea really needs to up its game in regulating the crypto space.
South Korean authorities are finally waking up. Regulation is a double-edged sword but in this case, it might be necessary for protecting the market.