After the first trial, authorities have acquitted South Korean crypto traders accused of engaging in arbitrage between overseas and local exchanges. They allegedly sought to exploit the price discrepancy, known as the Kimchi premium, between South Korean exchanges and those abroad.
The prosecutors claimed that the price gap ranged from approximately 3% to 5%, leading to a profit of about $3.2 billion.
South Korea Crypto Traders Let Off The Hook
A local report stated that the judge ruled traders should have registered to conduct trading activities between local and overseas exchanges. However, enforcing this registration requirement is challenging.
“If the actions of the defendants are considered as ‘payments between South Korea and foreign countries,’ then companies engaging in such activities should register with the Ministry of Economy and Finance for trade payment settlements.”
Essentially, the traders took advantage of the price gap between the price of crypto on South Korean crypto exchanges and overseas crypto exchanges.
Crypto has been seen as more expensive on South Korean exchanges. This is because there is less opportunity for high-return investments within the country.
This phenomenon is known as the Kimchi Premium, but when prices decrease, it’s termed the Kimchi Discount.
In 2021, South Korea soared to its peak in crypto revenue, amounting to $4.2 billion, mirroring Bitcoin’s historic surge to approximately $65,000 on global exchanges.
Looking ahead, Statista forecasts crypto revenue within the country to reach $2.2 billion by 2028.
Furthermore, the diligence of bank employees was scrutinized during the court proceedings. It stated that 16 individuals profited significantly from exploiting the price difference between the two exchange locations.
“It appears that bank employees mostly processed the transfer transactions without verifying whether the transactions stated on the foreign exchange transfer applications actually existed.”
The court declared that despite the prosecution’s appeal, there was insufficient concrete evidence to prove any violation of the law.
“Therefore, even if this case is judged as not guilty, it cannot be seen as violating Supreme Court precedents.”
However, regulatory clarity remains elusive within the nation. On February 7, BeInCrypto reported that the Virtual Asset Protection Act won’t be enforced in South Korea until July 2024.
South Korean Crypto Traders in Government
Once these regulations are enacted, traders who conceal crucial information or participate in market manipulation or fraud may face penalties. This includes the potential for life imprisonment.
In December 2023, BeInCrypto reported an increase in the popularity of crypto amongst South Korean National Assembly members.
An investigation conducted by the Anti-Corruption and Civil Rights Commission reveals that in 2022, only 8 members owned 24 different crypto assets.
However, by 2023, the number had increased to 17 members, holding 107 types of crypto assets. This number makes up nearly 6% of all South Korean National Assembly members.