South Korean regulatory authorities are turning their attention to over-the-counter (OTC) cryptocurrency trading, expressing growing concerns over its potential exploitation for illicit activities. The country's financial regulator has reportedly intensified its scrutiny of the over-the-counter cryptocurrency market.
During a meeting addressing "Criminal Legal Issues Related to Virtual Assets," officials from the Financial Services Commission (FSC), including deputy chief prosecutors Ki No-Seong and Park Min-woo, raised the issue of OTC cryptocurrency trading. No-Seong underscored the need for regulatory oversight in the OTC cryptocurrency market, citing worries related to money laundering.
In a statement, which was translated from Korean using Google Translate, Seong emphasized the presence of illegal virtual currency OTC firms operating with overseas legal entities. These entities engage in the illicit conversion of virtual currencies into Korean won or foreign currencies. Seong's statement suggested the necessity of supervising these companies as unregistered virtual asset trading entities. It's important to note that the term "OTC cryptocurrency market" encompasses exchanges that are not officially recognized by the government. Digital currency OTC trading encompasses all trading conducted outside of regulated platforms, including peer -to-peer (P2P) exchanges. In contrast, Upbit, South Korea's largest regulated cryptocurrency platform, lists 172 cryptocurrencies,whereas the OTC platform supports as many as 700 cryptocurrencies.
The report also cited numerous instances of OTC trading platforms being used to exchange digital assets for Korean won. An example involved the International Crime Investigation Department of the Incheon District Prosecutor's Office arresting and prosecuting three individuals for engaging in illegal foreign exchange transactions from October 2021 to October 2022. These individuals were allegedly involved in the purchase of $70.9 million (94 billion won) worth of digital currency from overseas OTCs at the request of Libyan clients, subsequently exchanging it for cash in South Korea. The South Korean Customs Service estimated that illegal foreign exchange transactions utilizing digital currencies amounted to $4 billion (5.6 trillion won) the previous year.
South Korea has established a reputation for its stringent cryptocurrency regulations and has implemented various measures to combat cryptocurrency-related crimes over the years. The country's regulators have adopted a more proactive stance in the wake of the Terra collapse.
