$600m of illegal cryptocurrency forex found in South Korea
International cryptocurrency payments might be at odds with existing laws around the world.
Reuters reports that South Korean customs officials have found cryptocurrency to have been used in 637.5 billion won (US$596.02 million) of unauthorised foreign currency exchanges.
"Customs service have been closely looking at illegal foreign exchange trading using cryptocurrency," said a statement from the South Korean task force behind the discovery. Customs said there were also cases where traders in Japan sent millions of dollars' worth of yen to their partners in South Korea for illegal currency trading.
The news comes as part of South Korea's ongoing efforts to rein in the cryptocurrency industry, including an end to anonymous trading and a crystallisation of the applicable tax laws for cryptocurrency.
Caught on a technicality
It's worth noting that the "foreign exchange crimes," as Reuters called them, might include a wide variety of situations where someone used cryptocurrency to send money overseas or otherwise used cryptocurrency as a way of exchanging money. Exchanging foreign currency is tightly regulated, and it's possible that a private citizen who sends or receives Korean won via cryptocurrency might be on the wrong side of the law, especially if it's being done in connection with business purposes.
It might be more informative to think of US$600 million as a very rough estimate of South Korea's international cryptocurrency transfer volume to date. It would have been almost impossible to gauge how much value was transferred overseas through private coins like Monero, so it's also possible that US$600m is a very conservative estimate.
The international payment system was one of cryptocurrency's first targets. For example, Ripple was specifically created to solve the "unacceptable" international payment system, while Stellar Lumens was created in its image as an adjusted decentralised variation, with a focus on developing countries.
It's not entirely clear when, how or even whether South Korea intends to crackdown on cryptocurrency international transfers. Reuters reports that the officials did not announce what kind of penalties, if any, would be levied on those found to have engaged in illegal foreign currency exchanges via cryptocurrency.
Foreign currency transfers may be one of those areas where the current laws may need to catch up to the realities of an increasingly decentralised global currency system. Exchange rates, transfer fees, local liquidity issues and other problems are all on cryptocurrency's to-solve list, and many of the regulations needed to protect consumers today might not be necessary or applicable in a few years.
For example, if Stellar's envisioned decentralised exchange comes to fruition, people will be able to freely exchange money (and other assets) peer to peer worldwide. It would be difficult to actually enforce existing laws on such a platform.
In contrast, Ripple aims to create a system that can work in compliance with existing laws around the world rather than move beyond them.
It remains to be seen how South Korean customs officials plan to tackle this gap, but most countries will need to grapple with it at some point. Some existing laws can be applied to cryptocurrencies, but others may end up as vestigial tails in the digital economy.
- What is Bitcoin’s Taproot upgrade and what does it mean for the network?
- Bitcoin is back above US$40,000 – here’s why
- Expert analysis: Ethereum price up 30% with further gains on the horizon
- 5 key tax time 2021 questions for investors
- Amazon set to accept Bitcoin and cryptocurrencies for payments, claims anonymous source