- South Korean officials escalate oversight of OTC crypto platforms amid concerns of illicit activities.
- Billion-dollar smuggling operations raise questions about the role of OTC platforms in the crypto market.
South Korean officials have recently deepened their scrutiny of “over-the-counter” (OTC) crypto trading platforms, citing mounting concerns about potential criminal activities associated with these platforms. In response to these concerns, the country’s financial regulators have begun closely monitoring OTC crypto trading.
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Authorities Alarmed by Suspected Criminal Activity
In light of growing concerns within South Korea’s crypto ecosystem, government officials have redirected their attention towards OTC crypto trading platforms. These concerns have arisen due to suspicions that these platforms are being exploited for illicit activities, pushing authorities to explore regulatory measures.
According to a report featured in a local newspaper, Deputy Prosecutor General Ki-No-Seong and Park Min-woo from the Financial Services Commission (FSC) took part in a session titled “Criminal Legal Issues Related to Crypto Assets.” The session zeroed in on crypto exchanges operating across the nation that exist outside the boundaries of existing legal frameworks.
In the wake of this event, No-Seong raised the alarm on the OTC crypto market, expressing worries about its involvement in criminal activities:
“Illegal crypto companies have overseas entities engaging in converting illegally obtained cryptocurrency into Korean won or foreign currency. These companies need to be regulated as undeclared cryptocurrency exchange businesses.”
Understanding OTC Crypto Exchanges
The term “OTC crypto exchange” refers to trading platforms that function within South Korea but operate without formal recognition from regulatory authorities.
In practice, transactions involving crypto assets on OTC platforms, including peer-to-peer (P2P) exchanges, often resemble operations seen on regulated platforms. A report presented to the authorities reveals that while South Korea’s largest recognized crypto exchange, Upbit, offers access to 172 crypto assets, OTC platforms extend their services to more than 700 crypto assets.
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Detecting Billion-Dollar Smuggling Operations
Moreover, the report featured allegations suggesting that OTC platforms serve as conduits for converting crypto assets into Korean won.
The International Crimes Investigation Department of the Incheon District Prosecutors’ Office made a significant breakthrough in the case, arresting three individuals between October 2021 and October 2022. These individuals were accused of engaging in illegal currency transactions via these platforms, and charges were promptly filed against them.
Investigations revealed that these individuals had acquired crypto assets worth an astounding $70.9 million (94 billion won) from overseas OTC platforms at the behest of a Libyan group. Subsequently, the assets were transferred to South Korea for conversion into cash.
A report issued by the Korea Customs Service estimated that the scale of illegal currency transactions involving crypto assets reached a staggering $4 billion the previous year.
In light of the increasing concerns surrounding OTC crypto trading platforms and their alleged links to criminal activities, South Korean authorities are actively exploring regulatory measures to address these issues.
As they intensify their efforts to monitor and regulate these platforms, the crypto scene in South Korea is poised for significant changes in the coming months. This development highlights the importance of transparency and adherence to legal frameworks within the cryptocurrency industry, not only in South Korea but on a worldwide scale.
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