The South Korean government will tighten up regulations on cryptocurrency transactions made to take advantage of the so-called “kimchi premium” on The Korea Times reported on Monday.at local exchanges,
The decision came last Friday at a virtual meeting held by the Financial Supervisory Service (FSS), with the participants, including several other regulators and major South Korean banks, reportedly raising concerns over cryptocurrency speculation.
For the past few weeks, Bitcoin has traded on South Korean cryptocurrency exchanges at a significant premium—at times over 20%—raising suspicions that investors are actively engaged in arbitrage, or the practice of taking advantage of a price difference between various markets.
Increased attention to cryptocurrency transactions is part of the government’s broader initiative to tackle suspicious foreign exchange remittances involving Chinese residents, and potentially illegal activities such as tax evasion and money laundering.
“Authorities will keep monitoring any signs of illegal trading activities in the cryptocurrency market here, and team up with global institutions to systematically deal with unlawful acts made through overseas exchanges,” a government official told The Korea Times.
As reported by Yonhap News Agency, the stricter measures will require South Korean financial institutions to tighten monitoring of cryptocurrency withdrawals and report suspicious transactions to the Financial Intelligence Unit (FIU), the government agency tracking illegal money flows. Meanwhile, the country’s tax agency will put more focus on alleged tax dodgers who may use cryptocurrencies to hide their funds away from the authorities.
According to the Office for Government Policy Coordination, “individuals should make careful decisions related to cryptocurrencies,” since those “have no intrinsic value” and serve as “means of speculation rather than investment.”
Earlier this month, commercial banks in South Korea introduced limits on money transfers for retail customers, requiring them to verify the purpose of cross-border transactions over $50,000. Meanwhile, Upbit, the major South Korean exchange, implemented a 72-hour won withdrawal rule for accounts receiving funds for the first time, making it more challenging to perform arbitrage.
At the time of writing, Bitcoin was changing hands around KRW 73,300,000 (~$65,725) at Upbit, and trading near $56,500 on major western exchanges.