2 November 2024
South Korea to Restrict Cross Border Crypto Trading
South Korea will soon curb overseas cryptocurrency transactions that are taking advantage of arbitrage trading opportunities.
According to a report from Korea Economic Daily, there is a sudden spike in transactions between Korea and China. The country’s leading banks found fiat transfers of over $72.7 million to China between Apr. 1 and Apr. 9. This is an eightfold surge from $9.07 million in total for the whole of March.
Korean regulators suspect that the sudden spike may be linked to cryptocurrency purchases carried on foreign exchanges, made to sell the same cryptocurrency on domestic exchanges at a premium rate. Regulators also speculate that the transactions can be related to crypto traders looking to arbitrage the kimchi premium—the difference in the value of cryptocurrencies on Korean and global exchanges.
Such price differences usually occur due to extreme optimism among Korean crypto speculators. Since the beginning of 2021, Bitcoin has been traded at a much higher rate on Korean exchanges. This premium surge above 20% in early April, which may have driven the opportunity through overseas bank transactions.
South Korea’s Financial Supervisory Service (FSS) has raised concerns about the potential increase in money laundering and scams due to such overseas transactions. FSS is reportedly formulating new guidelines for strict monitoring of cross-border transactions related to cryptocurrency.
“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,” an official told the Korea Times.
Korean regulators had previously suspended domestic exchanges from serving foreigners to eliminate price differences and from being exploited by investors seeking arbitrage. However, this solution seems to be insufficient.
Disclaimer: The author’s views and opinions are for informational purposes only and do not constitute financial, investment, or other advice.
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