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!
Country
Issue
Kryptos Use Case
India
Cryptocurrency transactions are taxed as capital gains, with evolving legislation creating uncertainty.
Kryptos.io streamlines the process by automatically tracking transactions and computing capital gains, adjusting to new regulations for precise reporting.
Brazil
Cryptocurrencies are subject to capital gains tax and must be reported, posing challenges with complex requirements.
Kryptos.io simplifies compliance by offering real-time transaction tracking and detailed tax calculations, making it easier to meet Brazil’s tax obligations.
Nigeria
Regulatory framework for cryptocurrencies is evolving, with uncertainty around taxation and restrictions from the Central Bank.
Kryptos.io provides an adaptable solution by maintaining detailed records and generating flexible reports, helping users stay compliant despite regulatory changes.
USA
Cryptocurrency transactions are subject to capital gains tax, with detailed IRS reporting requirements.
Kryptos.io enhances compliance by automating the tracking of transactions and generating comprehensive tax reports, facilitating adherence to IRS requirements.
UK
Cryptocurrencies are taxed under both capital gains tax and income tax, requiring careful tracking and reporting.
Kryptos.io aids UK users by monitoring both capital gains and income from crypto transactions, ensuring accurate and straightforward tax reporting.
Australia
Cryptocurrencies are subject to capital gains tax, and users must report their gains and losses to the ATO.
Kryptos.io assists Australian users by providing seamless transaction tracking and precise capital gains calculations, ensuring efficient compliance with ATO reporting requirements.
Germany
Cryptocurrencies are taxed as private assets with gains subject to tax if held for less than a year.
Kryptos.io supports German users by tracking holding periods and computing taxes on cryptocurrency transactions, ensuring adherence to German tax regulations.
Japan
Cryptocurrency gains are treated as miscellaneous income and are subject to high tax rates.
Kryptos.io helps Japanese users by offering a detailed tracking system and calculating taxes on miscellaneous income, efficiently managing high tax obligations.
Scenario
Description
Kryptos Features that can be of aid
Multiple Exchanges and Wallets
Consolidating records from various exchanges and wallets to maintain a comprehensive overview of crypto activities.
Seamless integration with numerous exchanges and wallets, automatic import, and consolidation of records.
International Transactions
Managing records for cross-border transactions, including currency conversions and compliance with international tax laws.
Support for multiple currencies, efficient management of cross-border activities, accurate currency conversion for reporting.
Complex Transactions
Handling trades, swaps, staking, lending, and other sophisticated crypto activities.
Advanced tracking, reporting, and documentation for various transaction types. Kryptos' DeFi and NFT modules offer specialized tools for managing decentralized finance and NFT activities, ensuring precise records and comprehensive oversight.
How we reviewed this article
Written by
Brihasi Dey
Social Media Manager, Content Writer, Strategist, and Marketer - An IT graduate well versed in SaaS, AI, & Web3, assisting Tech and Blockchain brands in scaling with Content.
Reviewed by
Ajith Chandan
Content Creator - Kryptos, A Web2 Marketer transitioned to Web3 with 3 years of expertise in Content (Writing. Marketing. Strategizing) and Social media marketing.
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.
See More
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!
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.