After Financial Services Commission (FSC) Chairman Eun Sang-soo gave a verbal warning to virtual currency trade, prices in the domestic market have dropped further than in the overseas market, reining in “Kimchi Premium” – a phenomenon where virtual currencies are traded at higher prices in South Korea than overseas.
Bitcoins were traded at a higher price by 4.24 percentage points in South Korea’s virtual currency exchange Upbit than in global exchange Binance as of 5 p.m. on Friday, reported cryptocurrency price comparing website Cryprice. The difference in prices of Bitcoins between the two exchanges decreased by more than 3 percentage points from 7.59 percentage points as 6 p.m. on Thursday. This implies that kimchi premium has been held back since Bitcoins priced higher in South Korea showed a larger decrease in prices than overseas.
With kimchi premium prevailing all the while, there was a significant rise in overseas remittances that are allegedly linked to illegal foreign exchange transaction to make a profit margin between the cryptocurrency markets in South Korean and China, according to research. Non-South Korean residents and foreigners transferred 97.59 million and 7,000 dollars to China-based accounts via South Korea’s five major commercial banks – KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH Nonghyup from April 1 to April 13, based on data provided by the Financial Supervisory Service to People Power Party lawmaker Sung Il-jong. This shows a 950 percent rise from last year’s monthly average transfer amount of 9.29 million and 3,000 dollars, translating into a 10-fold increase of the monthly average figure just in 13 days. “We can reasonably suspect that such an explosive transfer to China is attributable to an arbitrage trading of cryptocurrencies,” according to an insider of the financial industry. “It is likely that such attempts will be made continuously as long as you can expect even just a one to two percent of kimchi premium for the time being.”