In a recent revelation, South Korea’s financial regulator, Financial Services Commission (FSC) has a list of crypto transactions executed by a lawmaker from the opposition party. The regulator reported the transactions to local prosecutors which sparked domestic outrage over a potential conflict of interest.
According to local media reports, Rep. Kim Nam-kuk of the Democratic Party of Korea allegedly withdrew 800,000 WEMIX tokens from late February to early March last year. Notably, these transactions were reported to the FSC’s Financial Intelligence Unit (FIU).
Sources reveal that Kim’s WEMIX holdings stood at 6 billion won ($4.5 million) between January and February last year. Sources reveal that the WEMIX was delisted from major exchanges in South Korea last year for allegedly reporting inaccurate circulation supply figures. The issuing company WeMade unsuccessfully challenged the delisting in court.
The report stated that the FIU classified the withdrawals as suspicious transactions and reported them to the prosecutor’s office. The primary role of the FIU is to receive and analyze suspicious activity reports (SARs) from financial institutions and other reporting organizations.
These reports are submitted when a financial institution identifies a potential money laundering or terrorist financing risk in a customer’s transaction.
On March 25, 2022, South Korea implemented the Financial Action Task Force’s (FATF) travel rule, shortly after Kim reportedly made his withdrawals. The travel rule requires exchanges to collect personal data on transactions and report them to authorities when they surpass a certain limit.
However, as per the report, Kim said that he did not cash out his tokens and did not violate any laws and there is no reporting requirement for virtual assets in South Korea’s Public Service Ethics Act.
He said that he transferred his holdings to another account and since the price of the other coins that were bought with the transferred money has decreased, there are now just a few hundred million won rather than 6 billion won. He added:
There is no indication that any laws have been breached and I’m arranging my account in preparation for disclosing tomorrow.
Notably, sources reveal that Kim had co-sponsored an amendment to the Income Tax Act in July 2021, which included a provision to defer taxation on virtual assets. South Korea postponed plans to tax income from crypto as well as income from the “transfer or lending” of virtual assets to 2025.
While the initial plan was to impose a 20% tax on crypto investment gains above about $2,100 per year, South Korea’s newly elected president made an announcement suggesting otherwise. Last week, Yoon Suk-yeol, South Korean president, announced that he would try to delay taxation concerning crypto investment gains until the Digital Asset Basic Act (DABA) comes into force.
As the South Korean crypto market exceeded 55 trillion won (around $42 billion) in the second half of 2021, the authorities have been speedily progressing toward crypto regulation. Moreover, the collapses that occurred in the crypto sector last year, including the collapse of Terra and the FTX exchange, sent a strong message to regulators.
In March, the South Korean parliament commenced its discussion for robust and wide-ranging crypto regulations. The government is prioritizing investor protection and the issuance and disclosure of assets as reported by Todayq News.