"How much will you exchange Tether (USDT) for cash...?"
A gift certificate exchange office inside an office building in Gangnam, Seoul. When a male customer in his 40s asked whether he could exchange one of the cryptocurrencies, Tether, for Korean won through a hole in the transparent acrylic panel set up above the counter, the exchange office owner, Mr. A, said this.
Mr. A glanced up at the customer's face, opened the door next to him, and took the customer into the inner room. Mr. A and the customer each pulled out their 'coin wallets' installed on their smartphones and scanned the QR code. Soon, the customer's Tether transferred into Mr. A's coin wallet, and the customer received several hundred thousand won via an account transfer. The 'cryptocurrency exchange' took no more than 5 minutes.
According to the cryptocurrency industry on the 17th, a 'new type of exchange business' that exchanges cryptocurrency and won is flourishing around Gangnam, Seoul. Primarily, gift certificate exchange offices that buy and sell department store gift certificates are operating while adding cryptocurrencies to their traded items.
◇Exchanging cash for cryptocurrency through Upbit, Bithumb, etc... avoiding fund tracking
To generally trade cryptocurrency in South Korea, one must create an account at a bank and then use exchanges like Upbit or Bithumb. Cryptocurrency transactions at gift certificate exchange offices are discreet. They are conducted through a direct transaction method (OTC), allowing for the cashing of cryptocurrency or, conversely, exchanging cash for cryptocurrency without real-name verification. No records are kept.
In this process, the gift certificate exchange office takes about 1% of the transaction amount as a commission. Mr. B, a gift certificate exchanger, noted that "people who are reluctant to clarify the source of their funds primarily come here."
◇Even the merchants at Namdaemun use Tether… used by overseas gambling or voice phishing organizations
Tether is widely used in illicit 'exchanges' conducted at gift certificate exchange offices. Tether is a stablecoin based on the U.S. dollar, maintaining a price of 1 Tether equal to 1 dollar. Unlike Bitcoin or Ethereum, it does not fluctuate in price, allowing for transactions within a predictable range.
Because of this, foreign merchants visiting markets like Namdaemun have recently started using Tether as well. Mr. B said, "Those people cannot bring large sums of money at once from their home country, so they exchange for Tether to bring it in and buy goods here to take back out." It is also said that private exchangers in Myeongdong are engaged in cryptocurrency exchange work.
However, cryptocurrency exchanges can be used as a means of money laundering or tax evasion. Mr. B stated, "If a parent gifts several tens of millions won to a child by exchanging it for Tether, no one will know," adding that "people engaged in illegal gambling at overseas casinos exchange won for Tether before leaving, then buy chips with Tether there to gamble."
According to the Foreign Exchange Transactions Act, anyone who exports amounts exceeding $10,000 (approximately 14 million won) without reporting it will face a fine, and those exceeding $30,000 (approximately 42 million won) may face imprisonment of up to one year or a fine of up to 100 million won. Exchanging won for Tether at a private exchange and holding it in a coin wallet allows one to avoid fund tracking.
This method is also said to be used in the operation of illegal overseas gambling sites. The gambling site organization is structured in a multi-level format, where members gather funds and pass them to the mastermind. Members withdraw money from the operating accounts of the gambling sites to avoid detection by investigative authorities and exchange it for Tether at private exchange offices. The mastermind then again exchanges this Tether for cash at the exchange to launder the money.
This method is also used in voice phishing crimes. Another gift certificate exchanger, Mr. C, is under police investigation for using an account that was involved in a voice phishing incident after conducting a transaction with a customer involving virtual assets. Mr. C said, "Because of that, my account was frozen, making it difficult to make a living. Since then, I have been trying to verify customers' identities and, if possible, transact in cash."
◇The business registration certificate includes 'virtual asset intermediary and trading'... Expert says "illegal without reporting to FIU"
A gift certificate exchange business that is exchanging cryptocurrency for won has reported to the National Tax Service and added 'virtual asset intermediation and trading' to the industry listed on their business registration certificate.
However, experts believe that even in such cases, there may be legal risks. Attorney Kim Seong-su of GY Kwangya Law Office explained that regardless of reporting to the National Tax Service, if one does not report to the Financial Intelligence Unit (FIU) according to the Specific Financial Information Act, it would be considered unregistered business. Attorney Kim stated, "There has not yet been a 'private exchange' operator registered as a virtual asset business with the FIU."
According to the Financial Services Commission, as of the 1st, only 27 virtual asset businesses have registered with the FIU, including exchanges, wallets, and custodians. A source in the cryptocurrency industry also stated, "If they have not reported to the FIU, then all are operating illegally."
Attorney Kim also stated, "Direct cryptocurrency transactions carry a high risk of being exploited for money laundering or illegal transactions," and warned that "(private cryptocurrency exchangers) could potentially face charges for aiding fraud with negligent intent under the Specific Economic Crimes Act, or violations of the Act on the Concealment of Criminal Proceeds."