South Korea and Russia moving to block unknown users of cryptos


If there is one thing that troubles regulators and law enforcement officials the world over about cryptocurrencies, it is the fact that the criminal element in our society is given free rein to gallop about the blockchain of its choice, knowing full well that the anonymity of the technology will disguise its every move. A terrific vacuum exists today over this issue, such that, if the crypto world does not address this issue directly, which it is loath to do, then governments will step forward in their own way to close the privacy gap.

South Korean officials have moved demonstrably in this direction, having already upset the exchange community by demanding that every trader may only transfer funds to a bank account with a local bank. Today’s news is that South Korean Supreme Prosecutors’ Office (SPO) has “established a task force charged with the responsibility of tackling cryptocurrency-related fraud and crimes.” The specific responsibility of the SPO sponsored task force will be to investigate fraud, illegal money laundering, crimes, and other illegal activities within the fields of fintech and cryptocurrency.

The SPO is reacting to the escalating level of complaints related to cryptocurrencies, whether they pertain to fraud or to the act of investing. Such complaints in 2016 were at 53, barely noise level in any jurisdiction. This same category of complaints, however, rose by nine fold in 2017 to 453, but current estimates for 2018 from the Financial Supervisory Service, which compiles these complaints, have exploded. The agency relayed to a local economic news outlet that they are now dealing with 4,591 registered cases for the previous year. These increases correlate almost exactly to similar rates reported by Japanese police authorities for cryptocurrency related crimes in Japan.

While South Korea has always been known as a hotbed for cryptocurrency trading and activity, local lawmakers have not been that accommodative. Over a year ago, rules were put in place that “required traders to register account transfers through a local bank, thereby thwarting the anonymity draw that is so popular among crypto enthusiasts.” According to one anonymous employee at a South Korean exchange:

Exchange profits are down 90% on what they were when the market was at its peak.

Justice can also be swift in this part of the world. As we reported in January: “For the first time, a judge in South Korea has stepped forward and handed out sentences to two crypto executives for falsifying exchange volume reports and profiting from internal wash trades… In the actual scam at Komid, Choi and Park set up five fake accounts, then ran as many as five million transactions through them, earning them a nice profit of $45 million, as well.” Sentences ranged from 2 to 3 years in this precedent-setting case.

Russia’s Duma Committee on Financial Markets has also been bothered by similar complaint issues and is reviewing how best to mandate an identification process for all users of digital assets. The first step will be to make it illegal for anyone dealing in cryptos to be unidentified. Anatoly Aksakov, the committee chairman, is suggesting a penalty of 15 years in prison, as an obvious deterrent for corruption and money laundering in the crypto ecosphere.

Regulations are still in draft stage, although the exact identification method and the agency responsible for auditing compliance have yet to be defined. Time is of the essence, however, since Russian President, Vladimir Putin, recently put pressure on government officials to adopt crypto regulations by July 2019.

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