South Korea cracks down on illegal FX and digital asset transactions
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South Korea has been cracking down on the virtual asset industry to ensure that all players comply with the existing regulatory framework. In 2022, the Korea Customs Service detected 15 cases of illegal foreign exchange transactions used for speculative purposes in the virtual asset industry.
South Korea uncovers $4.3 billion in illegal FX transactions used for virtual asset speculation
The illegal FX transactions discovered by the Korea Customs Service in 2022 were valued at 5.6 trillion won, equivalent to around $4.3 billion. According to a local news publication, Yonhap News Agency, the cases were part of the total cases of trade and economy crimes discovered by the agency in 2022.
The total illegal transactions flagged by the agency in 2022 were more than reported during the previous year. The 2022 figures were more than half of what was reported in 2022 to reach 8.2 trillion, worth around $6.2 billion.
The financial market regulators in South Korea have aggressively sought ways to regulate the market and eliminate illegal transactions. In July 2022, the South Korean regulators unveiled a probe into “abnormal” FX transactions valued at $3.1 billion. These transactions were associated with crypto investments used for money laundering.
The illegal transactions were facilitated at commercial banks such as the Shinhan Bank and the Woori Bank. The two are some of the largest banking institutions in South Korea. The Financial Supervisory Service of South Korea, which operates under the Financial Services Commission (FSC), noted a significant increase in such transactions.
According to this regulatory body, between February 2021 and July 2022, 4.1 trillion won, equivalent to $3.1 billion worth of illegal financial transactions, were reported. These transactions involved cryptocurrency exchanges and a local trading firm.
South Korean regulators crack down on crypto activities
South Korea is among the largest crypto hubs globally. The country has a buzzing retail crypto market with a significantly high level of crypto adoption. However, the rapid growth of the crypto industry has attracted regulatory attention.
In 2017, the Foreign Exchange Transactions Act mandated firms offering crypto services receive regulatory sanctioning from the FSC. The country has since been cracking down against the exchanges operating illegally, with 16 foreign exchanges, including MEXC Global and KuCoin coming under scrutiny.
South Korea also recently started reviewing the forex transactions guidelines under the Foreign Exchanges Transactions Act. The review comes amid criticism of the limits of this policy. The country has approved nine securities firms to engage in the FX business and target retail and institutional investors.
Besides attracting a significant number of crypto firms, South Korea is also looking to boost the potential of its forex markets by lowering the barrier of entry for offshore firms. The proposed changes are slated to be adopted in Q2 2024 and end the strict decades-old policy. The changes will build public confidence in the industry.
