South Korean Authorities Consider Tightening Scrutiny on OTC Crypto Transactions

Efforts have been intensified to curb the malpractices linked to kimchi trading circles, with authorities uncovering associated clandestine enterprises, illicit semiconductor transactions, and precious metal smuggling operations. Nevertheless, the OTC market in South Korea still operates with minimal regulations.

Regulatory Focus Shifts to OTC Crypto Market

Recent activities underscore a growing determination among law enforcement agencies to impose stricter regulations on the OTC market. An event held earlier in the month, named “Legal Challenges in the Virtual Assets Field,” witnessed active participation from the judicial system and representatives from the Financial Services Commission and the Seoul Southern District Prosecutors’ Office Virtual Asset Crime Joint Investigation Team.

Participants emphasized the necessity for “enhanced” and “rigorous” crypto regulatory measures, pinpointing the OTC markets as the burgeoning hub of cryptocurrency-related criminal activities, including fraud and money laundering.

Deputy Chief Prosecutor Ki No-seong advocated for stringent regulations on “OTC enterprises,” stating that these companies have international branches involved in converting illicitly acquired virtual currencies into Korean Won or other currencies, thus necessitating regulatory intervention.

The OTC market was labeled as a marketplace predominantly utilized by affluent investors, allegedly offering trading services for over 700 varieties of coins. Hong Ki-hoon, a professor at Hongik University, projected that the enforcement and financial agencies would amplify their stern stance towards the virtual currency market, anticipating the introduction of stringent measures against market manipulations and money laundering activities.

Earlier this year, police authorities dismantled an alleged international OTC-kimchi premium trading circle active within South Korea. Several individuals were apprehended and charged with breaching the Specific Financial Information Act and the Foreign Exchange Transactions Act, having procured “over $76 million” in digital assets from OTC dealers and international exchanges, which were purportedly sold “on behalf of overseas clients” on domestic platforms, as per the prosecution’s claims.