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Regulators are creating guidelines around overseas remittances involving crypto assets.

South Korea may soon curb overseas cryptocurrency transactions that take advantage of arbitrage trading opportunities.

The Kimchi Premium

According to a report from Korea Economic Daily, there has been a sudden rise in transactions between Korea and China.

The country’s leading banks found fiat transfers of $72.7 million (81.2 billion won) to China between Apr. 1 and Apr. 9. This was an eightfold increase from $9.07 million in total for the whole of March.

Korean regulators suspect that the sudden spike in transactions is linked to cryptocurrency purchases that were carried out on foreign exchanges, made with the intention of selling the same cryptocurrency on domestic exchanges at a premium.

Regulators suspect the transactions may be related to crypto traders looking to arbitrage the kimchi premium—the difference in the price of cryptocurrencies on Korean and global exchanges.

Such price differences occur during extreme optimism among Korean crypto speculators. Since the beginning of 2021, Bitcoin has been trading at a higher rate than the global average price on Korean exchanges due to a bullish market.

This premium climbed above 20% in early April, which may have driven the opportunity through overseas bank transactions.

FSS Will Take Action

South Korea’s leading financial regulator, the Financial Supervisory Service (FSS), said it was concerned about a potential increase in money laundering and fraud risks due to such overseas transactions.

Now, FSS is creating guidelines to strengthen the monitoring of cross-border transactions connected with 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 previously banned domestic exchanges from serving foreigners in order to prevent price differences from being exploited by investors seeking arbitrage.

However, given today’s news, that solution seems to have been insufficient.

Source: cryptobriefing.com

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