South Korea Introduces Special Unit to Combat Illegal Crypto Activities

South Korea has launched a special investigations unit to combat the rising cases of criminal activities related to cryptocurrencies. The multi-agency unit will reportedly protect the interests of the investors as the country awaits proper regulations for the industry.

Dubbed the Joint Investigation Centre for Crypto Crimes, the investigations unit is comprised of professionals from the judicial, financial, and tax agencies, the South Korean Supreme Prosecutor’s Office mentioned in a statement seen by Reuters.

South Korea Regulates Crypto

According to the statement, the cryptocurrency sector in South Korea is growing fast, and digital assets currently compare to other investment products like stocks. However, the sector lacks proper legal protection for investors and has inadequate regulations. Thus, the investigations unit is expected to fill the regulatory gaps until proper laws are passed.

Specifically, the new investigations unit will reportedly examine cryptocurrencies with high price fluctuations and pursue the delisting of suspicious projects from the digital asset exchanges. Additionally, the unit will tackle illegal trading practices, unauthorized foreign exchange transfers, and money laundering.

Recently, South Korea has seen a rise in cases of illegal activities in the cryptocurrency sector. According to the Prosecutor's Office, the losses from cryptocurrency-related crimes increased by 118% for the total of five years ending in 2022 to 1 trillion won (USD $785 million). The crimes include illegal foreign exchange transactions, price manipulations, and Ponzi schemes.

Rising Illegal Crypto Activities

Among the cases of suspected illegal cryptocurrency activity in South Korea is the collapse of the stablecoin project TerraUSD and cryptocurrency Terra LUNA. The projects collapsed in 2022, wiping billions of investors’ money and causing unprecedented market volatility. The projects' Co-Founder, Do Kwon, is serving a court sentence in Montenegro and faces charges in the US and South Korea.

According to the statement, the cryptocurrency exchanges in South Korea reported an increase of 1,263% in suspected illegal crypto activities from 66 cases reported in 2021 to 900 cases in 2022. The cases were reported amid a decline of 66% in the country’s crypto market capitalization.

Meanwhile, two weeks ago, Finance Magnates reported that South Korea’s financial regulator had introduced new disclosure requirements for companies holding cryptocurrencies. The regulations are part of the country's efforts to regulate digital assets.

While unveiling the new regulations, the Financial Services Commission (FSC) said that companies are required to share information about the number of digital assets they own, the nature of the assets, as well as information about their business model.