Legal Review Opinion on the Compliance of a Crypto Asset Exchange Service (Kimchi Premium Arbitrage)

Client Information

Corporate Client / Business Entity
 

Case Details

The client operates a business overseas and had been utilizing a cryptocurrency arbitrage strategy commonly known as the “Kimchi Premium” in order to reduce remittance costs when transferring funds to Korea.

During this process, the client began assisting acquaintances with currency exchange transactions in return for a small commission. As the frequency and volume of these transactions gradually increased, the client became concerned about potential violations of the Foreign Exchange Transactions Act and the Act on Reporting and Use of Specified Financial Transaction Information (AML Act).

Recognizing that the matter required more than general criminal law advice, the client sought professional legal counsel from Decent Law Firm’s Digital Asset Team, which possesses in-depth knowledge of cryptocurrency technology and regulatory enforcement practices.

1. In-Depth Analysis of Relevant Case Law

Decent conducted a detailed review of recent court decisions, which show an increasingly strict judicial stance on crypto-based currency exchange activities. We closely analyzed how the client’s situation differed from precedents involving illegal exchange businesses, emphasizing that the transactions were limited to acquaintances and that no organized or professional sales structure existed.


2. Legal Risk Assessment

Based on the current transaction frequency, commission structure, and scope of counterparties, we concluded that the activities were unlikely to be immediately classified as a “business.” However, we also identified the threshold at which expansion in scale or repetition could trigger regulatory or criminal liability and clearly explained this risk to the client.


3. Review of AML Act Applicability

Relying on Supreme Court precedents, we developed a legal position that the client’s activities were closer to using crypto assets as a means of exchange rather than operating a professional crypto trading business for the benefit of others. On this basis, the likelihood of being penalized as an unreported Virtual Asset Service Provider (VASP) was assessed as low.


4. Practical Compliance Guidelines

To minimize future legal risk, Decent provided concrete operational guidelines, including:

- Setting monthly transaction frequency and volume limits

- Restricting counterparties and prohibiting promotion to the general public

- Structuring commission arrangements

- Maintaining proper transaction records and documentation