South Korean regulators have turned their attention towards over-the-counter (OTC) crypto trading due to concerns about its potential use in illicit activities. The financial watchdogs in South Korea are actively monitoring activities within the unregulated OTC crypto market.
During a session on “Criminal Legal Issues Related to Virtual Assets,” key regulatory officials including Deputy Chief Prosecutor Ki No-Seong and Park Min-woo of the Financial Services Commission (FSC) highlighted the need for OTC crypto market regulation due to the significant risks associated with money laundering, as reported by local media.
In a statement, Ki No-Seong expressed the necessity of regulating illegal OTC crypto companies, many of which are foreign-based and engage in the illicit conversion of virtual currency into Korean won or other foreign currencies. This highlights the urgency to supervise these entities as unregistered virtual asset trading businesses.
The term “OTC crypto market” encompasses exchanges that lack official government recognition. Transactions within the digital currency OTC market extend beyond regulated platforms and can include peer-to-peer (P2P) exchanges. Notably, the largest regulated crypto platform in South Korea, Upbit, offers 172 cryptocurrencies, while the OTC platforms provide access to as many as 700 cryptocurrencies.
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Instances of OTC platforms being used to convert digital assets into Korean won have been reported. For instance, the International Crimes Investigation Department of the Incheon District Prosecutors’ Office arrested and indicted three individuals for their involvement 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 OTCs at the request of Libyans and subsequently converted it into cash in Korea. The Korea Customs Service estimated the value of such unlawful foreign exchange transactions using digital currency to be $4 billion (5.6 trillion won) in the previous year.
South Korea has garnered a strong reputation for its rigorous cryptocurrency regulations aimed at ensuring investor protection. In a recent report by Todayq News, the government introduced a pivotal bill designed to freeze North Korean cryptocurrency assets, particularly in response to a series of cyberattacks directed by North Korean groups, including the popular Lazarus group. Furthermore, South Korea has also taken proactive measures by establishing a collaborative regulatory authority dedicated to combating cryptocurrency-related criminal activities.