South Korea’s ‘crypto’ whales in financial regulator’s sights amid money laundering concerns
The Financial Services Commission (FSC), South Korea’s financial watchdog, has revealed that it will keep a close eye on virtual currency whales to prevent money laundering.
According to the report, the FSC says whales worth at least KRW100 million (US$70,000) will be closely monitored. The report notes that “customers with large holdings of virtual assets are at higher risk of money laundering,” making stricter scrutiny imperative.
The focus on whales has been further narrowed to include “single listed coins” and stablecoins with a low market value. These small-cap digital currencies are subject to wild price swings due to whale activity unlike large-caps like BTC and ETH, the FSC says.
“Thirty-six percent of individually listed virtual assets are small with a market value of less than KRW100 million ($70,421), so it is necessary to be aware of sudden price fluctuations and lack of liquidity,” the report said.
The FSC notes that “mean price volatility (MDD) for domestic virtual assets is 73% and 76% for single-listed virtual assets.”
The study from Financial Watchdog is part of FSC’s Risk Assessment Index Development, Improvement, and Application Methods Study for New Business Areas. According to the study, operators of digital assets and virtual currency whales will not be the only ones under scrutiny, as digital investment-linked finance companies, fintech firms and loan operators will also be under close scrutiny.
“In the case of an independently listed virtual asset, it is possible that it did not meet the listing criteria of other virtual asset operators, and it may be considered that the risk of virtual asset laundering is high,” the FSC said.
Just another day in South Korea’s digital asset ecosystem
For investors in South Korea’s virtual currency industry, the reports of increased surveillance are nothing new, as law enforcement has been cracking down on the industry in recent weeks. The decision to scrutinize the trading of operators in the country’s ecosystem comes on the heels of Terra’s collapse back in May, which led to billions of dollars in losses for South Korean investors.
The country’s parliament is working hard to develop a sound digital asset framework to be launched in 2024. The framework is rumored to be designed in line with global best practices and will see collaboration with the FSB, the Bank for International Settlements (BIS), the United States and EU regulators.
The move to strictly regulate the sector stands in stark contrast to President Yoon Suk-yeol’s campaign promises and his decision in May to delay taxation of virtual currency gains until 2024.
Meanwhile, former Bithumb chairman Lee Jung-hoon is having a torrid time in court, while Terra’s co-founders are going through a rough patch as South Korean regulators try to clean up the local industry.
See: BSV Global Blockchain Convention presentation, Sentinel Node: Blockchain Tools to Improve Cybersecurity
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