SEOUL, April 15 (Korea Bizwire) — A recent surge in international cash transfers to gain profits from arbitrage between Bitcoin prices overseas and in South Korea, where the so-called ‘kimchi premium’ is added to boost the price of Bitcoin, has South Korean banks on alert.
Ffive major banks — KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup — have reportedly distributed instructions to the head offices of each of the banks, warning them about foreign transfers related to cryptocurrency trades, sources said Wednesday.
The instructions advise banks to deny the foreign transfer if customers, including foreigners, request a foreign transfer of approximately US$50,000, which is the maximum amount allowed for foreign transfer without submitting additional documents.
The instructions aim to prevent bank customers from sending money overseas to purchase Bitcoin at a cheaper rate on a foreign cryptocurrency exchange, and then bring the Bitcoin back into a South Korean exchange for arbitrage, before sending the profits overseas once again to start another cycle.
One of the major banks reported that approximately $13.6 million was wired overseas in just seven business days since the start of this month, surpassing last month’s total amount of overseas transfers ($9.2 million).
As total of 161 foreign cash transfers took place on April 7, with customers remitting a total of around 3.8 million.
Among the transfers, between 70 and 80 percent were sent to China. Total spending on cryptocurrency has yet to be determined.
Current legislation allows foreign transfers of up to $5,000 per transaction, and up to $50,000 per year, without customers having to submit additional documents.
Since the recent surge in overseas transfer coincides with rising Bitcoin prices in South Korea largely driven by the ‘kimchi premium’, many can only speculate that the remittances are related to cryptocurrency trades.
Since banks cannot request additional documents, it is almost impossible to accurately filter foreign cash transfers related to Bitcoin purchases.
“As long as they meet the requirements stipulated in the Foreign Exchange Transactions Act, and split the amount of transfers, it is very unlikely we’d be able to stop them from engaging in arbitrage trade,” the state-run Korea Financial Intelligence Unit said.
H. M. Kang (firstname.lastname@example.org)