South Korea Focuses on OTC Crypto Regulations Amidst $4B Illegal Trades

by
Brihasi Dey
Reviewed by
min read
Last updated:

South Korea, a nation known for its technological advancements, is now turning its regulatory focus towards Over-The-Counter (OTC) cryptocurrency trading. This move comes amidst rising concerns over illegal trades amounting to approximately $4 billion. 

The country's financial regulators are keen on scrutinizing the OTC crypto market, which operates outside the purview of official recognition and regulation.

The OTC Crypto Market

The term "OTC crypto market" refers to exchanges that are not officially recognized by the government. These platforms include all transactions that occur outside regulated platforms, such as peer-to-peer (P2P) exchanges. 

Upbit, the largest regulated crypto platform in South Korea, supports approximately 172 cryptocurrencies. In contrast, OTC platforms offer around 700 different cryptocurrencies.

The $4 Billion Concern

Illegal foreign exchange transactions using digital currencies were estimated to be around $4 billion last year, according to the Korea Customs Service. There have been instances where OTC platforms were used to convert digital assets into Korean won illicitly, leading to several arrests and indictments.

One such instance happened last February when the International Crimes Investigation Department of the Incheon District Prosecutors' Office arrested and indicted three people on charges of violating the Specific Financial Information Act and the Foreign Exchange Transactions Act. 

As per the report, “They are suspected of engaging in illegal foreign exchange transactions between October 2021 and October of last year by purchasing 94 billion won worth of virtual currency from overseas OTC at the request of Libyans and then sending it to Korea to be converted into cash.”

South Korea currently lacks specific regulations to govern OTC trading directly. As per Article 10 of the Special Financial Information Act, domestic digital asset enterprises are prohibited from conducting transactions via OTC crypto companies. However, regular investors won't face penalties for unlawful foreign exchange activities unless they breach the Foreign Exchange Transaction Law.

The Regulatory Spotlight

According to a report released recently, South Korean regulators are increasingly concerned about the use of OTC platforms for criminal activities. Deputy Chief Prosecutor Ki No-Seong and Park Min-woo of the Financial Services Commission (FSC) recently attended a session on "Criminal Legal Issues Related to Virtual Assets." 

The session specifically focused on the unregulated OTC crypto market, highlighting the need for regulation due to money laundering concerns.

As Ja-seon Ye, a lawyer at Gwangya Law Firm, said, "In order to launder virtual currency, you must go through illegal virtual currency OTC. From the perspective of investigative agencies, an environment that can actively investigate illegal virtual currency OTC must be established to accurately identify virtual currency flows.”

The Crypto Tax Angle

The issue of illegal trade also brings up the topic of cryptocurrency taxation. South Korea has stringent crypto regulations and has implemented several laws to tackle crypto-related crimes. 

The country is becoming more proactive in its regulatory approach, especially in the wake of recent events like the collapse of the Terra cryptocurrency. Taxing crypto transactions could be another step in ensuring that the market operates within the boundaries of the law.

Crypto tax software like Kryptos can be invaluable, offering tools to assist investors in easily calculating their crypto-related taxes and staying compliant. 

Conclusion

South Korea's focus on regulating the OTC crypto market is a significant move in the broader context of cryptocurrency regulation. With illegal trades reaching alarming figures, the need for a structured regulatory framework has never been more urgent. 

As the country continues to evolve its policies, the global crypto community will be keenly watching the developments, as they could set precedents for other nations to follow.

FAQs

1. What is OTC crypto trading?

OTC (Over-The-Counter) crypto trading refers to transactions that occur directly between parties, outside of traditional exchanges. It's often used for large-volume trades.

2. Why doesn't South Korea have specific regulations for OTC crypto trading?

While South Korea has been proactive in regulating the broader crypto market, it currently lacks direct regulations for OTC trading. The country is still assessing the best approach to govern this segment of the market.

3. What does Article 10 of the Special Financial Information Act state?

Article 10 prohibits domestic digital asset enterprises from conducting transactions via OTC crypto companies, ensuring that official channels are used for such trades.

4. Can regular investors in South Korea be penalized for unlawful foreign exchange activities?

Yes, but only if they violate the Foreign Exchange Transaction Law. Otherwise, they won't face penalties specifically for OTC crypto trades.

5. How can Kryptos help crypto investors in South Korea?

Kryptos offers tools that assist investors in calculating their crypto-related taxes accurately, ensuring compliance with tax regulations, and simplifying the often complex process of crypto tax reporting.

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

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South Korea Focuses on OTC Crypto Regulations Amidst $4B Illegal Trades

By
Brihasi Dey
On

South Korea, a nation known for its technological advancements, is now turning its regulatory focus towards Over-The-Counter (OTC) cryptocurrency trading. This move comes amidst rising concerns over illegal trades amounting to approximately $4 billion. 

The country's financial regulators are keen on scrutinizing the OTC crypto market, which operates outside the purview of official recognition and regulation.

The OTC Crypto Market

The term "OTC crypto market" refers to exchanges that are not officially recognized by the government. These platforms include all transactions that occur outside regulated platforms, such as peer-to-peer (P2P) exchanges. 

Upbit, the largest regulated crypto platform in South Korea, supports approximately 172 cryptocurrencies. In contrast, OTC platforms offer around 700 different cryptocurrencies.

The $4 Billion Concern

Illegal foreign exchange transactions using digital currencies were estimated to be around $4 billion last year, according to the Korea Customs Service. There have been instances where OTC platforms were used to convert digital assets into Korean won illicitly, leading to several arrests and indictments.

One such instance happened last February when the International Crimes Investigation Department of the Incheon District Prosecutors' Office arrested and indicted three people on charges of violating the Specific Financial Information Act and the Foreign Exchange Transactions Act. 

As per the report, “They are suspected of engaging in illegal foreign exchange transactions between October 2021 and October of last year by purchasing 94 billion won worth of virtual currency from overseas OTC at the request of Libyans and then sending it to Korea to be converted into cash.”

South Korea currently lacks specific regulations to govern OTC trading directly. As per Article 10 of the Special Financial Information Act, domestic digital asset enterprises are prohibited from conducting transactions via OTC crypto companies. However, regular investors won't face penalties for unlawful foreign exchange activities unless they breach the Foreign Exchange Transaction Law.

The Regulatory Spotlight

According to a report released recently, South Korean regulators are increasingly concerned about the use of OTC platforms for criminal activities. Deputy Chief Prosecutor Ki No-Seong and Park Min-woo of the Financial Services Commission (FSC) recently attended a session on "Criminal Legal Issues Related to Virtual Assets." 

The session specifically focused on the unregulated OTC crypto market, highlighting the need for regulation due to money laundering concerns.

As Ja-seon Ye, a lawyer at Gwangya Law Firm, said, "In order to launder virtual currency, you must go through illegal virtual currency OTC. From the perspective of investigative agencies, an environment that can actively investigate illegal virtual currency OTC must be established to accurately identify virtual currency flows.”

The Crypto Tax Angle

The issue of illegal trade also brings up the topic of cryptocurrency taxation. South Korea has stringent crypto regulations and has implemented several laws to tackle crypto-related crimes. 

The country is becoming more proactive in its regulatory approach, especially in the wake of recent events like the collapse of the Terra cryptocurrency. Taxing crypto transactions could be another step in ensuring that the market operates within the boundaries of the law.

Crypto tax software like Kryptos can be invaluable, offering tools to assist investors in easily calculating their crypto-related taxes and staying compliant. 

Conclusion

South Korea's focus on regulating the OTC crypto market is a significant move in the broader context of cryptocurrency regulation. With illegal trades reaching alarming figures, the need for a structured regulatory framework has never been more urgent. 

As the country continues to evolve its policies, the global crypto community will be keenly watching the developments, as they could set precedents for other nations to follow.

FAQs

1. What is OTC crypto trading?

OTC (Over-The-Counter) crypto trading refers to transactions that occur directly between parties, outside of traditional exchanges. It's often used for large-volume trades.

2. Why doesn't South Korea have specific regulations for OTC crypto trading?

While South Korea has been proactive in regulating the broader crypto market, it currently lacks direct regulations for OTC trading. The country is still assessing the best approach to govern this segment of the market.

3. What does Article 10 of the Special Financial Information Act state?

Article 10 prohibits domestic digital asset enterprises from conducting transactions via OTC crypto companies, ensuring that official channels are used for such trades.

4. Can regular investors in South Korea be penalized for unlawful foreign exchange activities?

Yes, but only if they violate the Foreign Exchange Transaction Law. Otherwise, they won't face penalties specifically for OTC crypto trades.

5. How can Kryptos help crypto investors in South Korea?

Kryptos offers tools that assist investors in calculating their crypto-related taxes accurately, ensuring compliance with tax regulations, and simplifying the often complex process of crypto tax reporting.

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

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