South Korea has addressed the rising tide of cryptocurrency-related crimes by upgrading its temporary crypto crime unit to a permanent department. According to reports from local media outlets, the South Korean Ministry of Justice and Ministry of Security and Public Administration are collaborating on this initiative.
The decision to elevate the status of the crypto crime investigative unit comes amid a sharp increase in enforcement actions across South Korea. With over 16,000 reports of suspicious transactions from crypto companies received last year alone, the establishment of a permanent department is the government’s way to combat illicit activities in the cryptocurrency space.
Upcoming discussions in early May will center on matters like budget allocation and the appointment of prosecutors for the unit. Currently linked to the Seoul Southern District Prosecutors’ Office, the unit operates under temporary status and remains subject to potential dissolution by government decree.
Established in July with approximately 30 expert members, the unit collaborates with seven government agencies. This includes the Prosecutor’s Office, Financial Supervisory Service, Financial Intelligence Unit (FIU), and National Tax Service. Its transition to a permanent department status would facilitate equitable engagement with both domestic and international governmental entities, particularly ahead of the enactment of the Virtual Asset User Protection Act on July 19.
The impending enactment of the Virtual Asset User Protection Act, set to take effect on July 19, is anticipated to substantially escalate the workload of the investigative unit. This legislation carries severe penalties, including potential life imprisonment, for significant cryptocurrency-related crimes involving sums exceeding 5 billion won ($3.6 million).
Enforcement efforts targeting virtual asset-related offenses have seen a marked increase, with a nearly 49% uptick in reported suspicious transactions in 2023, totaling 16,076 instances, and a 90% surge in crime reports to law enforcement authorities.
In response, South Korea has implemented a range of measures aimed at bringing order to the cryptocurrency market, including tighter regulations for token listings on local exchanges and heightened scrutiny of exchange operations, with non-compliant exchanges facing the prospect of closure as recommended by the Financial Action Task Force.
The politicization of cryptocurrency has become evident in South Korea, with major political parties pledging to ease regulations ahead of this year’s parliamentary elections. President Yoon Suk Yeol’s administration, upon assuming office in 2022, postponed the implementation of a 20% tax on crypto capital gains originally scheduled for 2023, extending it to 2025, while concurrently ramping up efforts to enforce taxation on cryptocurrency transactions.
