Investigations are being conducted into South Korean banks’ possible complicity in the $6.5 billion in shady international transfers that have been linked to businesses that deal in cryptocurrency arbitrage.
Asia Times reported on Monday that the Financial Supervisory Service (FSS), after noticing a sizable number of international remittance transactions at the end of June, ordered an investigation into South Korean banks last month.
According to the research, the majority of the $6.5 billion transported outside between January 2021 and June 2022 originated in cryptocurrency exchange accounts before being transmitted abroad, indicating certain Korean businesses are taking advantage of the “Kimchi premium (kimp).“
South Korean exchanges and overseas exchanges is known as the Kimchi premium
The difference in cryptocurrency prices between South Korean exchanges and overseas exchanges is known as the Kimchi premium. Investors purchase cryptocurrencies from foreign exchanges and then resell them for a profit on local Korean platforms.
The trade of premium kimchi has raised concerns among regulators because it facilitates capital flight out of the nation.
According to market watcher CryptoQuant, the kimchi premium is now low at +3.37% but was above +20% as recently as late April.
According to Shinhan Bank and Woori Bank reports, the majority of the money sent overseas was first moved from domestic cryptocurrency exchanges to various corporate accounts held by Korean businesses.
These large remittances have raised red flags that investors are using huge sums of money to exploit the Kimchi premium, according to a Monday report from local news outlet Asia Times.
There are also suspicions that the funds remitted are being used for money laundering, according to the KBS news outlet on Sunday, with some employees from the unnamed companies that performed the remittances having been arrested.
When the FSS asked banks to investigate, the total amount moved abroad was more than twice what they anticipated to learn. The FSS is now anticipated to carry out additional on-site checks of local banks, which may find more cash that have been remitted, according to the Asia Times.
Because they permitted the most remittances, Shinhan and Woori are now anticipated to face punishment from the FSS. Sanctions are unavoidable since we are taking the foreign exchange transaction seriously, according to Asia Times’ report on FSS chairman Lee Bok-Hyeon.
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