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South Korea ‘crypto’ whales in financial regulator’s sights amid money laundering woes

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The Financial Services Commission (FSC), South Korea’s financial monitoring agency, has disclosed that it will closely watch virtual currency whales to prevent money laundering activities.

According to the report, the FSC says whales with at least KRW100 million (US$70,000) will receive close monitoring. The report notes that “customers with large virtual asset holdings are at higher risk of money laundering,” which makes it imperative for tighter scrutiny.

The focus on whales has been narrowed further to include “single listed coins” and stablecoins with a low market capitalization. These small-cap digital currencies are susceptible to wild swings in prices due to whale activity in contrast to large-cap assets like BTC and ETH, says the FSC.

“Thirty-six percent of individually listed virtual assets are small with a market capitalization of less than KRW100 million ($70,421), so it is necessary to be aware of sudden price fluctuations and lack of liquidity,” read the report.

The FSC notes that the “average price volatility (MDD) of domestic virtual assets is 73% and 76% for single-listed virtual assets.”

The study from the financial watchdog is part of the FSC’s Risk Assessment Index Development, Improvement, and Application Methods Study for New Business Areas. According to the study, digital asset operators and virtual currency whales will not be the only ones receiving scrutiny, as digital investment-linked financial companies, fintech firms, and loan operators will also be under tight monitoring.

“In the case of an independently listed virtual asset, it is possible that it did not meet the listing criteria of other virtual asset operators, and it can be evaluated that the risk of money laundering of virtual asset is high,” said the FSC.

Just another day in South Korea’s digital asset ecosystem

For investors in South Korea’s virtual currency industry, the reports of increased monitoring are nothing new, as law enforcement has been having a go at the industry in recent weeks. The decision to scrutinize the dealings of operators in the country’s ecosystem comes on the heels of Terra’s collapse back in May, which led to losses of billions of dollars for South Korean investors.

The country’s parliament is working hard to develop a wholesome digital asset framework to be launched in 2024. The framework is rumored to be drafted in line with global best practices and will see a collaboration with the FSB, Bank for International Settlements (BIS), United States, and European Union regulators.

The move to tightly regulate the sector stands in pale contrast to President Yoon Suk-yeol’s campaign promises and his decision in May to defer taxation on virtual currency gains until 2024.

Meanwhile, former Bithumb Chairman Lee Jung-hoon is having a torrid time in court, while Terra’s co-founders are going through a rough patch as South Korean regulators try to sanitize the local industry.

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