The Seoul Central District Prosecutor’s Office has launched a new investigation into illegal foreign remittances reportedly worth more than 2 trillion Korean won ($1.5 billion).
This money, SID prosecutors, was generated by trading the country’s so-called kimchi premium Bitcoin,
The investigation is part of a larger, year-long investigation by the Financial Supervisory Service (FSS), South Korea’s financial regulator.
Yesterday, the FSS presented its “investigation reference” to the Supreme Prosecutor’s Office for further investigation. “We are currently reviewing the data,” an official from the prosecutor’s office told a local media outlet.
The references presented include an inspection report on companies involved in foreign remittances. These companies reportedly include major banks in the country such as Woori Bank and Shinhan Bank.
According to the FSS, the companies in question profited by taking advantage of South Korea’s famous “kimchi premium” on bitcoin and subsequently transferred the profits overseas. In particular, a significant amount was remitted to China.
Kimchi Premium refers to the more expensive bitcoin in South Korea than in other markets. The premium created an attractive arbitrage opportunity for savvy crypto traders.
What is South Korea’s ‘Kimchi Premium’?
The difference in the price of bitcoin between South Korean exchanges and other exchanges is often referred to as the kimchi premium.
It is difficult and time-consuming for South Korean traders to move money in and out of the US dollar. This delay in the movement of funds creates a backlog of demand that can drive up the price of bitcoin.
With the recent investigation launched by Korean regulators on crypto exchanges, Kimchi Premium has fallen fast, Earlier this year, for example, premiums were as high as 21.5%,
Today this figure is much less. Bitcoin currently trades at $21,122 on exchanges such as Binance and Coinbase, according to the US data. CoinMarketCap,
But on Upbit, a popular South Korean exchange, bitcoin changed hands at 28.135 million won, or about $21,471, according to figures. trading view,
This shows that the premium has come down to just 1.6%.