Crypto-based illegal currency swaps top W12tr over 8 years; 80% of foreign suspects Chinese

Illegal foreign currency transactions conducted through virtual assets — commonly known as "hwanchigi," or crypto-based currency swaps — exceeded 12 trillion won ($8.82 billion) over the past eight-plus years, according to data from the Korea Customs Service. About 80 percent of foreign suspects identified in the cases were Chinese nationals.

Data submitted by the Korea Customs Service to People Power Party lawmaker Park Soo-young's office on Tuesday showed that 91 cases of virtual asset-based currency swaps totaling 12.14 trillion won were detected between 2018 and July of this year. That figure represents 67 percent of the 177 total currency swap cases worth 18.03 trillion won uncovered by the customs service during the same period. Of the 34 foreign nationals identified as suspects, 27 — or 79 percent — held Chinese citizenship.

From January through July this year, the amount detected in virtual asset-based currency swap cases reached 819.3 billion won. With such schemes being caught on a large scale, Park said the government must strengthen its framework for tracking overseas transaction data ahead of the planned introduction of a virtual asset income tax next year.

The National Tax Service has previously outlined plans to secure overseas transaction data through the Crypto-Asset Reporting Framework, or CARF. China is not a CARF participant, however, and the first exchange of information with the United States is not scheduled until 2029. That raises concerns that the government will be unable to obtain comprehensive overseas transaction data when taxation begins next year.

"We need a tax-capture system capable of tracking fund movements through overseas exchanges and personal wallets, as well as acquisition costs," Park said. "If the taxation infrastructure is not sufficient, the implementation timeline should be reconsidered — including the possibility of a delay."