March 27, 2024
South Korea Targets OTC Crypto Rules Amid $4B Illegal Trades
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South Korea Targets OTC Crypto Rules Amid $4B Illegal Trades

South Korean authorities have recently shifted their focus towards the oversight of over-the-counter (OTC) cryptocurrency trades due to mounting concerns regarding their potential involvement in criminal activities. The country’s financial regulators are actively monitoring activities within the OTC cryptocurrency market.

According to a report published by a local news outlet, prominent figures in the regulatory sphere, including deputy chief prosecutor Ki No-Seong and Park Min-woo of the Financial Services Commission (FSC), attended a session titled “Criminal Legal Issues Related to Virtual Assets.” This session primarily addressed the unregulated OTC cryptocurrency market. During the event, No-Seong emphasized the necessity of regulating the OTC crypto market, citing concerns related to money laundering.

In his statement, Ki No-Seong expressed the following concerns, as roughly translated by Google:

“Illegal virtual currency OTC companies operate through overseas entities and engage in the illicit conversion of virtual currencies into Korean won or foreign currency. There is a pressing need to regulate these entities as unregistered virtual asset trading businesses.”

The term “OTC crypto market” refers to cryptocurrency exchanges that lack official recognition from the government. OTC cryptocurrency transactions encompass all trading conducted outside the purview of regulated platforms, including peer-to-peer (P2P) exchanges. The report highlighted that Upbit, the largest regulated cryptocurrency platform in South Korea, offers trading for a total of 172 cryptocurrencies, whereas OTC platforms provide access to as many as 700 cryptocurrencies.

The report further detailed instances in which OTC platforms were used to convert digital assets into Korean won. The International Crimes Investigation Department of the Incheon District Prosecutors’ Office arrested and charged three individuals for their involvement in illegal foreign exchange transactions between October 2021 and October 2022. These individuals were discovered to have purchased approximately $70.9 million (94 billion won) worth of digital currency from overseas OTCs at the request of Libyans, subsequently transferring it to Korea for conversion into cash. According to estimates by the Korea Customs Service, the value of unlawful foreign exchange transactions conducted using digital currency amounted to $4 billion (5.6 trillion won) in the previous year.

South Korea has developed a reputation for its rigorous cryptocurrency regulations over the years and has implemented numerous measures to combat cryptocurrency-related crimes. The country’s regulatory authorities have taken a more proactive stance, particularly in the aftermath of the Terra’s collapse.

Image by lifeforstock on Freepik

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