South Korean Regulators Target OTC Crypto Market

South Korean financial regulators are closely monitoring over-the-counter (OTC) crypto trading due to growing concerns about its potential use in illegal activities. 

Park Min-woo from the Financial Services Commission (FSC) and Deputy Chief Prosecutor Ki No-Seong and other vital regulatory officials convened a session titled “Criminal Legal Issues Related to Virtual Assets,” per the report published in a local daily. No-Seong emphasized the necessity for regulatory control to tackle money laundering issues in the discussion focused on the unregulated OTC crypto industry.

A Google-translated version of the chief prosecutor’s statement read:

“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.”

The “OTC crypto market” covers all digital asset exchanges not officially recognized by the government. Digital currency OTC transactions encompass all transactions conducted outside regulated platforms, including P2P (peer-to-peer) exchanges.

The report states that there are 172 cryptocurrencies available on Upbit, the largest regulated crypto exchange in South Korea. In contrast, OTC platforms provide access to a much larger selection of over 700 cryptocurrencies.

Moreover, the report highlighted that OTC platforms were used to convert large numbers of digital assets into Korean won. The Incheon District Prosecutors’ Office’s International Crimes Investigation Department recently arrested and charged three people. They were involved in illegal foreign exchange transactions from October 2021 to October 2022.

The arrested group bought $70.9 million (94 billion won) of digital currency from overseas OTCs for Libyan clients. According to the report, they sent the cryptocurrency to South Korea to convert it into cash later. The Korea Customs Service estimated that illegal foreign exchange transactions using digital currency were valued at $4 billion (5.6 trillion won) last year.

South Korea Plans To Freeze North’s Crypto Assets

South Korea has implemented strict rules to deal with crypto-related crimes. Local media outlet Korea JonngAng Daily reported that the government plans to introduce a bill to track and freeze North Korea’s crypto assets used for its weapons program. 

The bill was first introduced by the National Intelligence Service in November last year. Subsequently, President Yoon Suk Yeon ordered a review, resulting in a ten-month-long process that involved collaboration with various government agencies. The updated bill includes tracking and mitigating crypto assets stolen by North Korea through hacking. Moreover, it seeks to enhance sanctions against North Korea.