South Korea has been witnessing a surge in the use of cryptocurrencies in illegal foreign exchange transactions. While the uptrend was witnessed after the onset of Covid-19, local reports suggest that 2021 numbers exceeded the figure from last year.
It was estimated to be worth around 812 billion won ($688 million) in virtual asset exchange between January and August this year. This was reportedly a year-on-year increase of over 40 times.
How is it done?
On the back of increased crypto adoption, offenders converted foreign remittances to crypto funds. In return, they could liquidate the amount at any local exchange without going through a foreign currency exchange.
Moreover, another 885.6 billion won was reportedly used for cryptocurrency trading and was busted as false remittances. The motivation of these trades was being associated with “Kimchi Premium” or Korea Premium Index.
It is defined by the listing of crypto-assets at a higher price in South Korean exchanges as compared to other global exchanges, allowing traders to profit from the arbitrage opportunity.
As per reports, foreign exchange offenders were the most prominent category followed by money laundering offenders. The news came as South Korea was in the process of making exchange regulations more stringent.
With new and tough KYC guidelines in place, it can become difficult for unverified users to withdraw funds. Recently, crypto-exchange Upbit began user verifications and other exchanges can soon follow suit.
Reports emphasized that the “ID verification sets the ground” for setting up an anti-money laundering system. Additionally, the Korean government will bring crypto profits under the tax bracket from early next year.
Going forward, virtual assets will attract a 20% income tax on transfer gains. These measures are expected to limit both liquidations at local exchanges and tax avoidance by offenders.