The nation has moved to shore up its regulatory system this yr within the wake of the so-called “Terra-Luna scandal,” which left thousands of domestic LUNC investors out of pocket.
The information has additionally been dominated by a high-profile political scandal involving token-owning lawmakers.
A number of (similarly high-profile) allegations of the market manipulation of so-called “kimchi cash” have additionally rocked the nation.
However up to now, regulation has targeted on centralized crypto exchanges.
Per Asia Kyungjae, “prosecutors and monetary authority officers” are actually “immediately mentioning” the “issues of” the OTC market.
OTC merchants have been implicated with smuggling and tax evasion fees pertaining to “kimchi premium” trading.
The kimchi premium is a bull market phenomenon whereby retail BTC costs rise a lot sooner in South Korea than elsewhere on the earth.
Throughout these intervals, South Korean exchanges’ BTC costs can climb to over 30% of the worldwide common.
Previously, this has seen South Korean merchants shopping for Bitcoin (BTC) from OTC merchants based mostly in nations resembling China.
Kimchi premium merchants then swap these BTC tokens for fiat on home crypto exchanges.
The police and prosecution officers have clamped down onerous on kimchi buying and selling rings, unearthing associated shell companies, illegal semiconductor trading, and precious metal smugglers in the process.
However the South Korean OTC market stays largely unregulated.
OTC Crypto Merchants: In South Korean Regulators’ Crosshairs?
An occasion held earlier this month on the Supreme Prosecutors’ Workplace signifies that legislation enforcers need to change that.
The occasion was titled “Authorized Challenges within the Digital Property Discipline” (literal translation), and noticed participation from the prosecution service.
Representatives from the Monetary Providers Fee and the Seoul Southern District Prosecutors’ Workplace Digital Asset Crime Joint Investigation Crew additionally attended.
Audio system on the occasion claimed “extra” and “stronger” crypto regulation was required.
They usually claimed that OTC markets had been turning into “the epicenter of digital currency-related crimes,” resembling “fraud and cash laundering.”
Deputy Chief Prosecutor Ki No-seong referred to as for regulation for “OTC firms,” explaining:
“Unlawful OTC [crypto] firms have abroad arms and are engaged within the enterprise of changing illegally obtained digital foreign money into Korean received or overseas foreign money. We should regulate these firms.”
Attendees referred to as the OTC market the “prime 1% market,” claiming that it was “primarily utilized by high-value traders.”
Some OTC marketplaces energetic in South Korea, they claimed, present “buying and selling companies for over 700 cash.”
Hong Ki-hoon, a professor of Enterprise Administration at Hongik College, mentioned,
“The investigative and monetary authorities are actually repeatedly sending robust messages concerning the digital foreign money market. Sooner or later, I count on stronger [regulations] to be imposed on digital foreign money market manipulation and cash laundering.”
In February this yr, police mentioned they’d closed down a suspected international OTC-kimchi premium trading ring operating in South Korea.
A gaggle of people, together with a Libyan and three North Korean defectors, had been charged with violations of the Particular Monetary Info Act and the Overseas Change Transactions Act.
Prosecutors mentioned the ring had purchased “over $76 million” value of cryptoassets from OTC distributors and abroad exchanges.
These cash had been then offered “on behalf of abroad purchasers” on home exchanges, prosecutors alleged.