South Korean regulators are concerned about the rise in the so-called kimchi trade in the country, as well as the fact that banks are not doing enough to prevent it.
Seoul customs officials have detained 16 people over suspicions of trading bitcoin (BTC) to cash in on the so-called kimchi premium. All of them were charged, although not all of those arrested, according to law enforcement officers, are traders – some may be brokers or intermediaries. The suspects are currently being questioned, and the authorities have not yet decided whether their cases should be forwarded to the prosecutor’s office.
The kimchi premium is the difference between the price of bitcoin in South Korea and the value of the first cryptocurrency on the international market. The difference is due to the closeness of the country’s financial sector. Some merchants seek to cash in on this difference, although this is a violation of the local foreign exchange law.
Currently, financial regulators are investigating several cases against all major commercial banks in the country – they are suspected of negligence. The total amount of illegal trade, according to authorities, is about $6.5 billion.
Regulators say they have repeatedly warned banks that more people in South Korea are looking to use the kimchi premium to their advantage, and some banks have indeed responded by tightening rules for transferring money abroad for South Korean customers. However, the majority of banks, according to supervisors, ignored the warnings.
It is reported that 16 detainees are just the beginning. South Korean law enforcement is investigating 23 more people who are believed to have set up shell companies to cash in on cryptocurrency price differentials.
In July, the Seoul prosecutor’s office launched an investigation into over 2 trillion Korean won ($1.5 billion) in money transfers from overseas related to bitcoin trading.
Source: Bits
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