South Korean authorities are investigating the banks within the jurisdiction for potentially being involved in assisting the doubtful overseas remittances of up to $6.5B which have an association with the firms dealing with crypto arbitrage.
South Korean Watchdogs Examine Banks for $6.5B Linked to Kimchi Premium
In a report published on 15th August by Asia Times, it was mentioned that the Financial Supervisory Service (FSS) directed scrutiny into the banks operating within South Korea the previous month. This was done following the detection of a considerable amount of transfers related to overseas remittance in recent June.
In the respective investigation, it was brought to the front that a large sum of nearly $6.5B remitted from 2021’s January to 2022’s June was taken from the accounts on the crypto exchange in advance of being delivered external to the country. This signifies that some Korean firms are deliberately manipulating the Kimchi premium (kimp). The Kimchi premium is known as the difference between crypto prices in the exchanges within South Korea as compared with the external exchanges.
Investors purchase crypto assets from overseas exchanges and then trade them to the native exchanges for a benefit. Several apprehensions have been expressed by the regulators regarding Kimchi premium-based trading because it leads to the capital flow from the country to the outside world. At the moment, the Kimchi premium is placed at an uncertain point of +3.37% however it was more than +20% in recent April as mentioned by CryptoQuant (a market tracker).
Kimchi Premium Trading for Money Laundering?
Woori Bank and Shinhan Bank have reportedly found out that the majority of the remitted funds were initially transacted out of the local exchanges of cryptocurrency diverse crypto accounts within the Korean firms. Huge concerns have been raised by the large remittances that substantial sums of funds are being utilized by the investors to manipulate Kimchi premium, as mentioned in our report on 15th August from Asia Times (a native news outlet).
There is also some apprehension pointing out that the limited funds are being utilized to carry out money laundering, as noted on 14th August by a news outlet named KBS. It was also mentioned that a few workers from the anonymous firms – involved in the respective remittances – have been caught by the security agencies.