South Korea’s financial regulator says it is taking steps to combat money laundering and other financial crimes involving virtual assets.

Virtual Assets and Financial Crime

The head of South Korea‘s financial services industry regulator recently vowed to crack down on those who use virtual assets for money laundering. Speaking at Anti-Money Laundering Day, Kim Byung-hwan, chairman of the Financial Services Commission (FSC), noted an increase in instances of virtual assets being used for illegal activities.

Kim also announced plans to amend foreign exchange regulations to enable regulators to monitor cross-border virtual asset transactions.

“In the future, we will revise the Foreign Exchange Transactions Act to impose a pre-registration requirement on virtual asset business operators handling cross-border virtual asset transactions and require them to report virtual asset transaction details to prevent virtual assets from becoming a means of currency manipulation or tax evasion,” the FSC head said.

The chairman also emphasized the need for proactive measures to combat crimes that harm people’s livelihoods, such as youth gambling and illegal reading rooms. He said this would involve going beyond reactive measures like monitoring, investigation, and detection.

In addition to their potential use in cross-border money laundering transactions, South Korean authorities have expressed concerns about the anonymity and pseudonymity of some virtual assets, which they argue hinders tracking and tracing illicit transactions. Authorities are also concerned about the “Kimchi premium” on cryptocurrencies like bitcoin. Some argue that this premium, which attracts both legitimate and illicit actors, poses an additional challenge for South Korean officials seeking to curb money laundering through virtual assets.

Meanwhile, a local report also quotes the FSC chairman discussing specific measures his agency will take to counter criminals:

“We will establish a system that can prevent crime by blocking the flow of criminal funds early and increase the effectiveness of confiscation by freezing accounts before funds are hidden,” the FSC chair said.