When people talk about illicit Korean cryptocurrency transactions, people tend to think of North Korean hackers stealing billions in bitcoin to finance the country’s nuclear weapons program.
but when south korea’s financial supervisory service (fss) announced on wednesday (july 27) that it was investigating $3.4bn in illegal foreign exchange (fx) transactions that may be linked to illegal cryptocurrency transactions, they were talking about the cousin kimchi .
Reading: Bitcoin south korea kimchi premium
In other words, they were talking about using cryptocurrencies to circumvent South Korea’s strict currency restrictions (using an arbitrage game that exists because of those restrictions) and possibly launder funds from China.
In both of these cases, the FSS is investigating what it believes to be “abnormal” currency transactions at two major banks over the past year, Bloomberg reported. Five branches of Woori Bank reported 1.6 trillion won ($1.3 billion) between May 2021 and last month, the FSS said. eleven branches of the shinhan bank moved 2.5 trillion won ($2.1 billion) between last February and July 4, it added.
South Korea’s Yonhap News Agency said several prosecutors’ offices are also investigating the transactions, but added that no criminal activity has been uncovered.
premium kimchi works like this: Because it is difficult to move large sums of money in and out of Korean cryptocurrency exchanges from abroad, the price of bitcoin and other cryptocurrencies for years has been substantially higher on Korean exchanges , thanks to the huge popularity of cryptocurrencies, despite government disapproval.
That price has risen as much as 20%, thanks to the popularity of cryptocurrencies, though it has recently been closer to a 2.2% increase. a person who buys crypto abroad and sells it for won on Korean exchanges can make quite a sum.
The problem is getting those profits out of Korea, where banks have strict reporting requirements for any foreign exchange transaction moving more than $50,000 in won per year out of the country, and amounts over $5,000 must be reported.
Banks are generally unlikely to approve currency transfers of funds made from the sale of crypto for won, or the use of funds from Korean accounts or credit cards to purchase crypto abroad. This is particularly due to the increased crackdown by the authorities in the past year, which has focused on money laundering, tax evasion and price manipulation, as well as stopping the flow of money out of the country.
It would be difficult to get billions of dollars out of the country, if they were generated from trading cryptocurrencies, without falsely reporting to banks as to where they came from.
Another part of the problem is that many Chinese cryptocurrency miners and owners, who are now barred from buying or selling any digital assets, are selling cryptocurrency in Korea and back across the border, raising money laundering concerns.
a lot of money
Putting aside the possible violation of foreign exchange laws, what is remarkable about the case is the size of the transactions, particularly in a country with such strict laws on foreign exchange transactions.
in March, sen. Elizabeth Warren, D-Massachusetts, suggested at a Senate Banking Committee hearing that Russian oligarchs could be evading billions of dollars in sanctions by using privacy coins, which are cryptocurrencies designed to evade tracking.
see also: use in ukraine sheds some light on the dark side of cryptocurrencies in the senate hearing
While you were told that the trading volume of privacy coins like monero revealed that this was not happening, what the premium kimchi violations show is that with planning and patience, it is possible to move large sums using smaller crypto transactions than they are very difficult to detect.
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