Recent data submitted by the Korea Customs Service has brought to light that in the first half of 2022, the amount of currency exchange fraud caught was about 1.5 trillion won, or over $1 billion.
According to local media Asia Kyungjae, the amount of fraudulent crypto transactions identified in the first half of 2022 is almost double the amount caught in the previous year, which was 826.8 billion won. Furthermore, in the past five years, it was found that the amount of money caught using virtual currency was about 4 trillion won.
Figures released by the Korea Customs Service show that customs officials have flagged a total of over $2.8 billion in crypto-linked transactions since 2017, compared to $600m flagged in the corresponding period of 2021.
One of the popular methods of fraud detected is currency exchange, which aids in achieving the effect of overseas remittance without going through a foreign exchange bank. It is a method of receiving Korean won and paying with the corresponding foreign currency abroad or receiving foreign currency from abroad and giving domestic won.
Exchange Transactions Using So-called ‘Kimchi Premium’
In the virtual currency market, exchange transactions using the so-called “kimchi premium,” in which bitcoins are traded at a higher price in Korea than abroad, have become rampant. According to the local media report, crypto frauds via the “Kimchi Premium” totaled 4 trillion won over five years.
The “Kimchi premium” is the price gap that occurs in South Korean crypto exchanges compared to foreign crypto exchanges. This difference is caused by a lack of high-return investment options for South Korean investors.
Government officials have pointed out the need to respond to foreign exchange crimes such as currency theft and crack down on them by linking financial authorities such as the Financial Services Commission and the Financial Supervisory Service with investigative agencies while also improving technical capabilities.
On the Flipside
Despite the rising number of cases involving crypto fraud, South Korea has been pushing adoption. Recently, Binance signed an MoU with the city of Busan in South Korea to push adoption. Furthermore, the easing of regulations by the Yun Seok-yeol government has boosted the entry of securities companies into the asset exchange business.
Why You Should Care
Recently, the South Korean government launched a crackdown on crypto-related fraud, as the government decided to keep a tight grip on rules, regulations, and policies around crypto. Most recently, the government announced that virtual asset airdrops can also be subject to the gift tax.