Transactions surge, money laundering intensifies? South Korea implements real-name system for digital currency transactions starting on 25th

According to the Korean Broadcasting Corporation, South Korea will begin to implement the "real-name system for digital currency transactions" from the 25th of this month. It is reported that one of the reasons for implementing this system is the sharp increase in the scale of virtual asset transactions. In the past three years, the total market value of virtual assets listed on domestic exchanges in South Korea has reached nearly 10 times that of three years ago. Another important reason is that virtual assets are being used for illegal activities such as money laundering.

According to data from the Korean virtual currency trading industry on the 16th of this month, the Upbit exchange's comprehensive market index (UBMI) was reported at 9742.62 points at 5:45 pm on the 15th, which is nearly 10 times the index (1000 points) since it was listed on October 1, 2017. In other words, the total market value of virtual currencies listed on Korean exchanges has increased 10 times in the past 3 years and 5 months.
At the same time, the index broke through 10,000 points on the 13th of this month, reaching a high of 10,291.44 points. The index is calculated based on all virtual currencies listed on the Upbit Korean Won Trading Market, and its numerical indicators represent the market value changes and market trends of all virtual currencies. An official from the exchange said that according to the calculation method of UBMI, the total market value and price of the overall virtual currency also rose by the same amount.
On March 15, the trading volume of the Korean cryptocurrency market once exceeded the average daily trading volume of the country's stock market. According to CoinMarketCap data, the 24-hour trading volume of major Korean cryptocurrency exchanges UPbit, Bithumb, Coinone and Korbit totaled more than $14.6 billion on Sunday. Last Friday, the Korea Composite Stock Price Index (KOSPI) had a trading volume of $14.5 billion and the Korea Securities Dealers Automatic Quotation Index (KOSDAQ) had a trading volume of $10 billion.

The crackdown on tax evasion and the surge in cryptocurrency trading volume are corresponding to the increasing number of tax evaders.
According to Yonhap News Agency, on March 15, the National Tax Service of South Korea said that among those who have defaulted on paying taxes, 2,416 people have been found to have used virtual currency to evade taxes. In response, the National Tax Service has imposed a total of about 36.6 billion won (about 32.2446 million US dollars) in fines. On March 16, "South Korea has seized 2,416 tax evaders who hid their wealth in Bitcoin" ranked 16th on the Weibo hot search list.
In the face of tax evasion using virtual currencies, South Korea has previously stated that it will impose taxes on income from virtual assets. Starting next year, domestic residents or domestic companies whose total balance in overseas financial accounts (including virtual assets in overseas exchanges) exceeds 500 million won on the last day of each year must report to the competent tax authorities in June of the following year. Violations of the obligation to report overseas financial accounts will be subject to a fine of up to 20% of the unreported amount, and if the unreported amount exceeds 5 billion won, they will be subject to criminal prosecution and list disclosure review.

As anti-money laundering requirements for virtual currency transactions surge, the South Korean government is concerned that virtual assets will be used for illegal activities such as money laundering.
On March 16, South Korea's Financial Services Commission (FSC) announced on Tuesday that businesses involved in virtual assets, including cryptocurrencies, must report their transactions to government agencies and comply with anti-money laundering regulations. The amendment to the reporting and use of specific financial transaction information will take effect on March 25. The amendment requires all businesses engaged in the exchange, storage and management of virtual assets to report their operations to the Korea Financial Intelligence Service. The Korea Financial Intelligence Service is an agency of the Financial Stability Board that is responsible for implementing anti-money laundering measures in South Korea. Those who plan to start a new business related to virtual assets must first report to the Financial Stability Board.
Those that have already opened must report to the agency within six months. If businesses fail to submit reports by September 24 (six months after the amendment takes effect), they face up to five years in prison or a fine of up to 50 million won ($44,200). From March 25, virtual asset businesses must thoroughly identify their customers and report any suspicious transactions to prevent money laundering using crypto assets. According to the Financial Stability Board (FSC), the amendments come amid growing concerns about the use of crypto assets for money laundering and other illegal activities.
On March 19, South Korean Finance Minister Hong Nam-ki said at a special meeting on the budget and accounts that cryptocurrencies are overheated compared to their actual value, and from an economic perspective, (investment) should be very cautious. Regarding the specific financial information law that will be implemented this month, Hong Nam-ki explained: "Exchanges trading virtual assets must now report transaction details to the government."
In the face of growing crypto transactions, the South Korean government’s real-name system is about to begin in order to prevent tax evasion and comply with anti-money laundering requirements. Will South Korea’s real-name identity authentication system put an end to the practice of anonymous cryptocurrency transactions? We will continue to pay attention.