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Sunday, December 4, 2022

Kimchi Premium Has Seen New South Korean Regulators Investigating Banks

For those who are unaware, the Kimchi premium is considered to be the gap in the prices of cryptocurrency in most of the South Korean exchanges when compared to other foreign exchanges.

Most investors, therefore, buy crypto from foreign exchanges and then sell them on local Korean exchanges for profit. And this is precisely why the banks in the East Asian country are being investigated for their roles in facilitating an overseas remittance of around $6.5 billion- which does seem to be tied up to companies that have arbitraged cryptocurrency. According to a report issued on Monday by Asia Times, the Financial Supervisory Service recently ordered an investigation into the banks of South Korea after they identified quite a significant amount of overseas remittances made at the end of June. 

South Korea Kimchi Premium Is Being Exploited For Personal Gain By Investors

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The investigation went on to find out that a large majority of the $6.5 billion that was remitted overseas between the January of 2021 and June of 2022 did come from most of the crypto exchange accounts before they were issued out to the country. This went on to suggest that a few Korean companies were deliberately exploiting the Kimchi Premium. With it being a useful accessory to investors looking to make a profit, regulators have been rightfully worried about the trading in this premium as it routinely encourages capital flight from the country. 

Currently, the South Korea Kimchi Premium sits at a modest +3.37% but was well above +20% as early as April- as reported by market tracker CryptoQuant. Multiple reports from Woori Bank and Shinhan Bank have found that most of the money that was remitted was first issued out of the domestic crypto exchanges to various corporate accounts of the Korean companies. These large remittances have also raised a couple of red flags that investors are using huge sums of money to exploit the premium, as mentioned by Asia Times. 

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