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South Korean officials have turned their attention to “over-the-counter” (OTC) crypto trading platforms due to increasing concerns in the country. Authorities, suspecting that these traded crypto assets are being used for criminal activities, also noted that the country’s financial regulators are monitoring these platforms.
Regulation is Necessary for Exchanges
According to a report published in a local newspaper, Deputy Prosecutor General Ki-No-Seong and Park Min-woo from the Financial Services Commission (FSC) participated in a session titled “Criminal Legal Issues Related to Crypto Assets,” which focused on crypto exchanges operating nationwide but not regulated within legal frameworks. Following the event, No-Seong called for the regulation of the OTC crypto market due to concerns about involvement in criminal activities:
“Illegal crypto companies have overseas entities and engage in converting illegally obtained cryptocurrency into Korean won or foreign currency. There is a need to regulate these companies as undeclared cryptocurrency exchange businesses.”
The term “OTC crypto exchange” is used for trade platforms operating in the country but not recognized by regulatory agencies. Crypto asset transactions, including peer-to-peer (P2P) exchanges, involve almost the same operations as regulated platforms. According to a report presented to the authorities, while South Korea’s largest recognized crypto exchange, Upbit, has a total of 172 crypto assets, OTC platforms offer trading services for over 700 crypto assets.
Billion-Dollar Smuggling Detected
The report also included allegations that OTC platforms are used to convert crypto assets into Korean won. The Incheon District Prosecutors’ Office’s International Crimes Investigation Department arrested three individuals between October 2021 and October 2022, accusing them of engaging in illegal currency transactions on these platforms. Charges were filed against these individuals.
It was found that these individuals purchased crypto assets worth $70.9 million (94 billion won) from overseas OTC platforms at the request of a Libyan group and then sent the assets to Korea to convert them into cash. According to a report released by the Korea Customs Service, it is estimated that illegal currency transactions using crypto assets amounted to $4 billion last year.