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South Korea: Lawmakers propose law for public officials to disclose digital asset holdings

Following the uproar triggered by South Korean lawmaker Kim Nam-kuk’s undisclosed digital currency holdings, a new bill has been presented before the Korean parliament urging public officials to disclose their holdings of digital currencies.

The bill, presented on May 19, seeks to expand the scope of the Public Official Ethics Act to include digital currencies for all classes of public officials, including candidates looking to run for office. Presently, disclosure rules for South Korean public officials are only limited to cash, bonds, and stocks in excess of $7,572.

By including digital currencies as part of the reporting requirements, lawmakers hope to reduce the illegal acquisition of wealth among public officials. The anonymous and borderless nature of digital currencies makes it easier to circumnavigate existing anti-money laundering (AML) rules, making it difficult for financial regulators to monitor transactions.

“It is necessary to expand the scope of assets that are subject to reporting to include virtual assets—this will help to ensure that public officials do not use their position to improperly accumulate wealth or conceal assets,” South Korean lawmaker Lee Man-hee said.

The new bill comes after the scathing allegations against lawmaker Kim Nam-kuk for campaign finance violations and concealing ill-gotten assets via digital currencies. Investigators allege that Kim used his position as a member of the House Committee on digital currencies to push back a new tax regime for digital currencies for his benefit.

Authorities allege that Kim liquidated his holdings ahead of South Korea’s implementation of a travel rule based on the recommendation of the Financial Action Task Force (FATF). However, Kim denies all charges on the grounds that he did not net illegal profits and “can transparently share all of the transaction records.”

“This is a serious moral hazard. He appeared to have had a get-rich-quick-scheme with crypto trading,” Daegu Mayor Hong Joon-pyo remarked. “He should have left his job as a lawmaker and focused on speculative trading instead.”

Cracking down hard on illegality

Since Kim’s allegations became public knowledge, authorities have raided the offices of several digital currency exchanges, including Upbit and Bithumb, in search of evidence against Kim.

Law enforcement authorities have also scored major wins against Terraform Labs associates in the form of asset seizures running into millions of dollars. In early March, authorities discovered a plush apartment, a fleet of imported cars, and security deposits belonging to embattled Terraform Labs CEO Do Kwon.

South Korea’s Financial Supervisory Service (FSS) is in the process of setting up a digital currency disclosure system to regulate the “listing, issuance, and circulation of digital assets.”

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