The top financial regulator in South Korea recently told regulators from 23 other countries that the kimchi premium has died since the country announced that it had banned anonymous cryptocurrency trading. The government has now announced that new guidelines are being introduced that will prevent local digital currency exchanges from buying the coins from foreign exchanges.
The disappearance of Kimchi Premium
The Financial Stability Board (FSB) recently held a meeting in Basel, Switzerland. The meeting was attended by Kim Yong-beom, the vice chairman of South Korea’s Financial Services Commission (FSC).
The FSB is a global entity which is tasked with monitoring as well as making recommendations on matters that concern global financial systems. The body is made up of central bankers and financial regulators drawn from 24 countries. Other members include the World Bank, International Monetary Fund, the Bank of International Settlements, the European Commission and the European Central Bank.
According to a statement issued by the FSC last week, Kim told other regulators that the Kimchi premium was at 0.6% as of June 19.
Real-Name System is Working
At the start of this year, the South Korean government introduced the real-name system for all digital currency accounts. The move also banned the use of anonymous bank accounts. The ban was aimed at preventing the use of cryptocurrencies for money laundering among other illegal practices. Additionally, the government introduced the real-name system so as to tame speculative investment in cryptocurrencies.
Since its introduction however, the system has met a lot of criticism. This is because only a handful of banks agreed to change the existing virtual crypto trading accounts into real-names ones. The rate of conversion is extremely very low and the few banks that offer these services only provide it to the largest cryprocurrency exchanges in the country. These include Korbit, Coinone, Upbit and Bithumb. Other smaller exchanges still use corporate accounts, which according to financial regulators, are prone to money laundering.
During a recent P2P loan review meeting held with the National Police Agency and the Ministry of Justice, Kim said that the real-name system was only applicable to exchanges that get virtual accounts at banks. He also indicated that many digital currency exchanges are still transacting using corporate accounts. The FSC announced that it will be stepping up monitoring of money transfer between foreign and local cryptocurrency exchanges.