South Korea is facing an increasing challenge with the use of cryptocurrency to facilitate drug trade, which threatens its reputation as a "drug-free" society. In 2023, drug-related arrests rose by 50%, with over 27,000 individuals apprehended. The issue came to light in August when prosecutors uncovered a network of university students using cryptocurrencies to purchase drugs. One student referred to as "User A," reportedly spent over $8,800 on illicit substances in 2023.

To address this problem, South Korea implemented the Virtual Asset User Protection Act (VAUPA) in 2024. This law requires cryptocurrency exchanges to enforce strict user verification processes and collaborate with domestic banks. However, Ohoon Kwon, a managing attorney at Cha & Kwon law offices, points out that fully cryptocurrency-based transactions remain challenging to trace, especially when criminals employ advanced money-laundering techniques. He stresses the need for the government to invest in more sophisticated tracking technologies to detect and prevent crimes facilitated by cryptocurrency effectively.

While South Korea is looking to strengthen its regulatory framework, there are concerns about potentially stifling innovation in its booming cryptocurrency sector. The country has become a major hub for blockchain development, with the South Korean won exceeding the U.S. dollar in crypto trading volume during the first quarter of 2024. Industry experts, including Justin Kim of Ava Labs and Rich O of OneKey, caution that overly strict regulations could undermine South Korea's competitive position in the crypto market. They suggest that a balanced approach is necessary—one that addresses illegal activities while also supporting industry growth. [KoreaPro - 2024.11.15]

URL : South Korea grapples with how to stymie crypto-fueled drug trade