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South Korean Regulators Eye OTC Crypto Regulation



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A nest of outdoor CCTV security cameras near the flag of South Korea, mounted on a flagpole.
Supply: Alexey Novikov/Adobe

South Korean regulators look set to show their consideration to the over-the-counter (OTC) crypto market, with indications regulation might be on its method.

The nation has moved to shore up its regulatory system this 12 months 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 so far, regulation has centered on centralized crypto exchanges.

Per Asia Kyungjae, “prosecutors and monetary authority officers” at the moment are “instantly mentioning” the “issues of” the OTC market.


OTC merchants have been implicated with smuggling and tax evasion costs pertaining to “kimchi premium” trading.

The kimchi premium is a bull market phenomenon whereby retail BTC costs rise a lot quicker in South Korea than elsewhere on the earth.


Throughout these durations, South Korean exchanges’ BTC costs can climb to over 30% of the worldwide common.

An equation showing current kimchi premium values at the time of writing.
Present kimchi premium values on the time of writing. (Supply:

Prior to now, this has seen South Korean merchants shopping for Bitcoin (BTC) from OTC merchants primarily based in international locations corresponding to China.

Kimchi premium merchants then swap these BTC tokens for fiat on home crypto exchanges.


The police and prosecution officers have clamped down exhausting 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 regulation enforcers wish to change that.

The occasion was titled “Authorized Challenges within the Digital Belongings Subject” (literal translation), and noticed participation from the prosecution service.


Representatives from the Monetary Companies Fee and the Seoul Southern District Prosecutors’ Workplace Digital Asset Crime Joint Investigation Staff additionally attended.

Audio system on the occasion claimed “extra” and “stronger” crypto regulation was required.


And so they claimed that OTC markets had been changing into “the epicenter of digital currency-related crimes,” corresponding to “fraud and cash laundering.”

Deputy Chief Prosecutor Ki No-seong referred to as for regulation for “OTC corporations,” explaining:


“Unlawful OTC [crypto] corporations 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 corporations.”

Attendees referred to as the OTC market the “prime 1% market,” claiming that it was “primarily utilized by high-value buyers.”

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, stated,

“The investigative and monetary authorities at the moment are 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.”

A graph showing Bitcoin (BTC) prices versus the South Korean won over the past year.
Bitcoin (BTC) costs versus the South Korean received over the previous 12 months. (Supply:

In February this 12 months, police stated 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 Data Act and the International Change Transactions Act.


Prosecutors stated the ring had purchased “over $76 million” value of cryptoassets from OTC distributors and abroad exchanges.

These cash had been then bought “on behalf of abroad purchasers” on home exchanges, prosecutors alleged.

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