South Korean financial regulators are intensifying their oversight of over-the-counter (OTC) cryptocurrency trades due to rising concerns about their potential use in illicit activities. Regulatory officials, including representatives from the Financial Services Commission, attended a session on "Criminal Legal Issues Related to Virtual Assets" to discuss the unregulated OTC crypto market. Deputy Chief Prosecutor Ki No-Seong emphasized the need to regulate OTC crypto firms involved in converting illegally obtained virtual currencies into Korean won or foreign currency, citing money laundering risks.
South Korean Regulators Target Unregulated OTC Crypto Trades Over Money Laundering Concerns
South Korean financial regulators are intensifying their scrutiny of over-the-counter (OTC) cryptocurrency trades amid growing apprehensions about their potential use in illegal financial activities. The country's financial authorities are reportedly closely monitoring trading activities within the OTC crypto market.
A report in a local news publication revealed that significant regulatory figures, including deputy chief prosecutor Ki No-Seong and Park Min-woo from the Financial Services Commission (FSC), attended a session titled "Criminal Legal Issues Related to Virtual Assets." The discussion revolved around unregulated OTC crypto trading, and during the event, No-Seong called for stricter oversight of this market segment due to concerns about money laundering.
In a statement translated from Korean, No-Seong expressed the following:
"Illegal virtual currency OTC companies have overseas corporations and are engaged in the business of converting illegally obtained virtual currency into Korean won or foreign currency. There is a need to regulate these companies as undeclared virtual asset trading businesses."
The term "OTC crypto market" refers to exchanges and trading platforms that are not officially recognized or regulated by the government. OTC transactions in the cryptocurrency space encompass all trading activities that occur outside of regulated platforms, including peer-to-peer (P2P) exchanges. Notably, Upbit, the largest regulated cryptocurrency platform in South Korea, lists a total of 172 cryptocurrencies, while OTC platforms offer access to as many as 700 different digital assets.
The report highlighted several instances where OTC platforms were employed to convert digital assets into Korean won. For instance, the International Crimes Investigation Department of the Incheon District Prosecutors' Office arrested and charged three individuals for engaging in illegal foreign exchange transactions between October 2021 and October 2022. These individuals were found to have purchased $70.9 million (94 billion won) worth of digital currency from overseas OTC platforms at the behest of Libyans and subsequently transferred it to Korea for conversion into cash. The Korea Customs Service estimated that the value of unlawful foreign exchange transactions involving digital currency amounted to $4 billion (5.6 trillion won) last year.
South Korea has earned a reputation for its stringent cryptocurrency regulations and has implemented a range of measures to combat crypto-related crimes. Recent events, such as the collapse of Terra, have prompted regulators to take a more proactive approach to ensuring the integrity of the crypto market.
(PRASHANT JHA, CoinTelegraph, 2023)