• Deposits on the ‘Big Four’ South Korean exchanges have increased by 1,368 percent

  • South Korea’s top four cryptocurrency exchanges are celebrating after two of them received operating licenses from the financial regulator and data revealed that they are now flooded with customer deposits. Bank commissions are also increasing, allowing the “oligopoly” of four to rule unchallenged over the country’s crypto industry. However, customs officials claim that they have discovered a slew of instances of illegal kimchi premium traders engaging in “illegal transactions.”

    According to iNews24 and Chosun, Upbit, the market-leading exchange, and Korbit, the country’s first trading platform, appear to have received their permits within hours of one another. The remaining two members, Bithumb and Coinone, will be hoping that their licenses will be approved soon. The four trading platforms were the only ones to secure key banking partnerships, allowing them to provide customers with real name-approved individual banking. Exchanges were told that without banking agreements, they would be unable to offer fiat KRW pairings as of the 24th of last month.

    Meanwhile, Kyunghyang Shinmun reported that data compiled by the Financial Supervisory Service and submitted to MP Yoon Chang-hyeon, a member of the National Assembly’s Political Affairs Committee, shows that deposits using real-name accounts at the big four exchanges totaled USD 7.75 billion. This figure represents a staggering 1,368 percent increase over June of last year, when comparable data was last compiled.

    Furthermore, since last year, the number of real name-verified accounts at partner banks has increased by 777 percent, with over 7.3 million such accounts now open.

    According to the data, banks have also reaped the benefits of their success. As the number of transactions increased, so did the fees paid by exchange customers.

    K-Bank (which partners Upbit), Nonghyup Bank (which partners Bithumb and Coinone), and Shinhan Bank (which partners Korbit) received a total of USD 14.2 million in exchange commissions in the second quarter of the current fiscal year. According to the media outlet, this figure represents a 3,139 percent increase in the third quarter of FY2020.

    Regulators and customs officials, on the other hand, have been sniffing around for signs of foul play among the big four customers and clients of other trading platforms, and this week claimed to have discovered scores of illegal transactions.

    According to SBS, the Korea Customs Service detected illegal overseas transactions involving cryptoassets totaling USD 684 million from January to August 2021, a 40 percent increase over the same period in 2020. A large portion of this figure is thought to be the work of kimchi premium opportunists, who transferred fiat abroad to buy crypto at lower prices before “dumping” coins on domestic exchanges, where they sold for up to 8% -10% more.

    According to Skolkg.com data, the kimchi premium is gradually making a comeback as prices rise, with tokens trading at around 2% higher than on international platforms.

    South Korean law requires all overseas transactions worth more than USD 5,000 to be reported to a customs office. Those looking to make a quick buck by transferring funds abroad, on the other hand, have increasingly used crypto to avoid customs officials and throw them off guard, working on foreign platforms when possible.

    In 2017, on the other hand, only one illegal crypto-related monetary transfer was recorded, with a value of approximately USD 82,000.

    But now that the “big four” appear to be moving quickly under the regulatory wing of the Financial Services Commission and its Financial Intelligence Unit agency, these opportunists are set to face the full force of South Korean law: the big four have duly handed over the trading records of their customers, who are now using exclusively anonymity-free accounts, to tax and customs auditors, sparking crackdowns, token seizures, and even some forced liasoning.

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