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South Korean officials have given their approval to a proposal that seeks to modify the country’s Public Service Ethics Act to encompass virtual assets, including cryptocurrency.
Amendments Seek to Address Disclosure Gaps and Impose Stricter Regulations on Cryptocurrencies
The current legislation mandates government officials to disclose their holdings of stocks, bonds, jewellery, gifted memberships, and other assets valued at over 1 million Korean won, which is approximately $760. However, the law does not currently require the disclosure of digital assets.
The decision to amend the law comes in the aftermath of a scandal involving Kim Nam-kuk, a former member of the South Korean Democratic Party. Kim is facing allegations of selling more than $4.5 million worth of cryptocurrency last year, shortly prior to an upcoming law revision that would have imposed limitations on such transactions.
In response to the allegations, Kim argues that he was not obligated to disclose his digital asset activities and asserts that he did not sell off his holdings, which were reportedly around 800,000 Wemix coins($4.5 million) but rather transferred them to another exchange.
Subsequently, Kim left the South Korean Democratic Party and became independent as he prepared his defence.
To tackle the matter, the South Korean government is in the process of formulating a revision to the current legislation. This amendment seeks to include digital assets, including cryptocurrency, within the framework of asset disclosure requirements that already apply to other forms of holdings.
The objective is to address possible gaps in the existing law, which have been brought to attention through the observation that virtual assets are not currently specified in the disclosed information pertaining to a lawmaker’s possessions. This intention has been outlined in an official government notice pertaining to the proposed amendment.
The amendment proposal received the subcommittee’s approval on May 19, and it is slated to proceed through a final vote during a plenary session scheduled for May 25.
Throughout the previous year, South Korean legislators have been actively engaged in the oversight and regulation of cryptocurrencies and associated assets, particularly in response to the tumultuous events surrounding the Luna and Terra blockchain’s collapse in May 2022.
In April 2023, a comprehensive regulatory package focusing on cryptocurrencies was put forth, aiming to introduce more stringent consequences for offences related to these digital currencies.
The proposed measures include augmented fines and the possibility of sentences ranging from one year to life imprisonment, reflecting a firm stance against such illicit activities.
South Korea’s Bold Step to Counter Crypto Laundering with Advanced Blockchain Analytics
In a recent move targeting international crypto laundering, South Korea’s prosecution service is poised to acquire state-of-the-art blockchain analytics software. This innovative technology is expected to empower authorities to apprehend individuals involved in illicit activities using cryptocurrencies across borders.
Equipped with these new tools, authorities aim to bring international cryptocurrency exchanges or related platforms under similar scrutiny as their domestic counterparts, ensuring a harmonized approach to oversight.
This advancement represents a significant stride towards a comprehensive and interconnected strategy to combat financial crimes associated with digital currencies. By embracing cutting-edge blockchain analytics, South Korea positions itself at the forefront of the global fight against crypto laundering on an international scale.
As South Korean prosecutors forge ahead with this groundbreaking initiative, anticipation builds around the bidding process to develop these cutting-edge tools, commencing this month. With numerous contenders attempting to shape the future of crypto tracking, the competition promises to be fierce.
The contractor chosen to bring this vision to life is faced with an exciting endeavour of delivering these groundbreaking tools by November. This will usher South Korea’s law enforcement capabilities into a transformative phase, enabling them to combat illicit activities associated with cryptocurrencies in a whole new way.
Through this visionary move, South Korean authorities demonstrate an unwavering commitment to curbing crypto exploitation and fostering an environment of enhanced regulatory oversight in the cryptocurrency sector. This groundbreaking development underscores the government’s proactive stance in strengthening the stability of digital currencies.
Expanding its horizons, South Korea establishes a strategic partnership with the United States, laying the groundwork for collaborative efforts to bolster the cryptocurrency and forex markets between the two nations. This unprecedented alliance heralds a new era of cross-border cooperation, setting the stage for innovation and synchronized regulations in the rapidly evolving digital finance landscape.
South Korean Exchanges Raided in Lawmaker’s Digital Assets Investigation
Last week, the offices of two South Korean cryptocurrency exchanges, Upbit and Bithumb, were raided by prosecutors in connection with an investigation involving lawmaker Kim Nam-kuk’s digital assets. The raid, conducted by a team from the Seoul Southern District Prosecutors Office, aimed to gather transaction records and other materials.
Kim, who reportedly operated his digital asset wallets on Upbit and Bithumb, resigned from his political party on May 14, just before the authorities’ raid. Allegations against Kim relate to suspicious cryptocurrency transactions he allegedly conducted while working on digital asset legislation in May and November of 2022.
In a Facebook post, Kim mentioned that he did not want to burden his fellow party members with the controversy surrounding his crypto dealings. He dismissed media reports as containing false facts and expressed his intention to reveal the truth.
Reports suggest that Kim liquidated over $4 million in cryptocurrency before the Financial Action Task Force enforced the “Travel Rule.” The lawmaker supported a bill that aimed to postpone the 20% capital gains tax on cryptocurrencies from 2023 to 2025.
Kim claimed that he did not cash out his digital assets but rather transferred them to another exchange, asserting that he was not obliged to report such activity.
According to Yonhap, Kim was reported to possess around 800,000 Wemix coins in 2021, amounting to approximately $4.5 million.
Bithumb, one of the exchanges allegedly involved in Kim’s funds, has faced scrutiny from local regulators in recent months. In December 2022, following accusations of embezzlement and stock price manipulation, the executive who held the largest shares in the exchange met an unfortunate fate. Subsequently, in January 2023, regulatory authorities conducted raids on Bithumb’s offices.
These events are part of the broader crackdown on cryptocurrency activities in South Korea. In April, the Bank of Korea was granted the authority to investigate cryptocurrency-related businesses, allowing banks to request access to transaction data from local exchanges.
Additionally, legislators passed an initial review of cryptocurrency regulations proposals, granting the Financial Services Commission the power to investigate and supervise digital asset-related activities and recommending harsher sentencing guidelines.
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