[Exclusive] Virtual Asset 'Hwanchigi' in the Trillions... Only 10% of Fines Collected This Year [Coin Lawless Zone] ②

8 Crackdowns Uncover 777.8 Billion Won in January–May
Stablecoins Emerging as New Tools for Crime
Authorities Unable to Monitor Exchanges, Creating a Legal Blind Spot

"Using funds transferred to a Chinese account in the defendant's name, the defendant purchased virtual assets such as Tether (USDT) on A, the largest cryptocurrency exchange, and sold them through B, a cryptocurrency exchange in Korea, for approximately 99.5 billion won. The defendant engaged in unregistered foreign exchange transactions by serving as an intermediary for foreign currency payments and receipts totaling about 207.3 billion won without proper registration." (Seoul Northern District Court, January 9, 2025)

Despite the fact that cross-border illegal foreign exchange crimes linked to virtual assets amount to several trillion won each year, it has been confirmed that the fines imposed after detection are not being properly collected.

According to data submitted by Assemblyman Min Byungdeok of the Democratic Party of Korea to the Korea Customs Service on July 7, the amount uncovered in virtual asset-related crimes from January to May of this year amounted to 2.2085 trillion won. By year, the figures were 826.8 billion won in 2021 and peaked at 5.6717 trillion won in 2022, before declining to 1.4568 trillion won in 2023 and 1.0631 trillion won in 2024, but then rising again to 2.4248 trillion won last year.

In particular, the scale of remittance crimes exploiting virtual assets accounted for the overwhelming majority of total cases: 823.8 billion won (10 cases) in 2021, 4.7566 trillion won (12 cases) in 2022, 1.4454 trillion won (19 cases) in 2023, 1.0575 trillion won (10 cases) in 2024, and 2.3574 trillion won (16 cases) last year. In the first five months of this year, 8 cases were detected, amounting to 777.8 billion won. "Hwachigi," which refers to transferring or receiving foreign currency between Korea and other countries without going through a bank, constitutes unauthorized foreign exchange business (a violation of Article 8 of the Foreign Exchange Transactions Act).

Looking at the Korea Customs Service's record of fines imposed for violations of the Foreign Exchange Transactions Act, only 7.751 billion won was actually collected out of an assessed 76.05 billion won between January and May of this year, resulting in a final collection rate of just 10.2%. By year, the rates were 9.0% (3.435 billion won) in 2021, 14.8% (7.397 billion won) in 2022, 13.4% (8.17 billion won) in 2023, 11.0% (9.257 billion won) in 2024, and 27.8% (23.744 billion won) last year.

Recently, the means used for these crimes have shifted toward stablecoins. According to blockchain data analytics firm Chainalysis, the estimated global value of illegal virtual asset transactions last year soared to USD 154 billion, a 162% increase from the previous year. Over the past several years, stablecoins have become central to illegal transactions, accounting for 84% of all illicit trading volume. This trend reflects the growing share of stablecoins in the overall cryptocurrency ecosystem, due to their practical advantages such as ease of cross-border movement, low volatility, and broad usability.

In fact, the dominance of stablecoins in the domestic virtual asset market is rising rapidly. The trading volume of stablecoins on Korean cryptocurrency exchanges was just 489.5 billion won in 2022 (0.0% of total trading volume), but surged to 10.9823 trillion won (0.8%) in 2023 and 166.1719 trillion won (5.5%) in 2024. Last year, the figure soared further to 278.4937 trillion won, accounting for 10.1% of all virtual asset trades. In the first five months of this year, stablecoin transactions reached 84.9146 trillion won out of a total trading volume of 615.7775 trillion won, with their share climbing to 13.8%.

Although the pace of evolution in virtual asset crimes is accelerating, authorities have been unable to keep up, according to those in the field. A Korea Customs Service official commented, "Since we do not have the authority to examine exchanges directly, there are inevitable limitations when we try to detect crimes by backtracking export and import transactions."

However, with the amended Foreign Exchange Transactions Act set to take effect this November, enforcement is expected to be strengthened. The amendment will impose mandatory registration for cross-border virtual asset transfer service providers, require submission of relevant documents, and stipulate imprisonment or fines for non-compliance. Kim Jongseung, CEO of Xcrypto, stated, "With the amendment to the Foreign Exchange Transactions Act, an obligation to report overseas virtual asset transfers has been introduced, and with the revision of the Act on Reporting and Using Specified Financial Transaction Information, anti-money laundering (AML) regulations have been strengthened. As a result, we expect that many of the previously raised concerns, such as 'hwachigi,' will be significantly addressed."

Experts also point out that post-incident tracing technology is needed for legal regulations to be effective in the field. Kim Seungjoo, Professor at the Graduate School of Information Security at Korea University, said, "Even if 'hwachigi' is detected, if the suspect claims to have lost their private key and hides the assets, there is virtually no way to forcibly recover the illegal funds." He emphasized, "The government should increase budgets and manpower to enhance forensic capabilities and actively invest in developing related equipment."

This content was produced with the assistance of AI translation services.