[The Dark Side of Cryptocurrency Revealed in Court ] Rare a Few Years Ago... Cryptocurrency Becoming a Means for Criminal Transactions

[Asia Economy Reporters Seongpil Cho, Daehyun Kim] In January of this year, a man stood in the defendant's seat in a criminal court. It was the sentencing hearing. The judge pronounced the verdict and explained the reasons for the sentence. "The crime in this case involves the defendant possessing child and adolescent pornography video files. Such acts distort sexual awareness and can induce other sexual crimes against children and adolescents, which makes the nature of the crime very serious..."

The man was indicted for transferring virtual currency worth 30,000 KRW in February last year and receiving 1,125 cases of child and adolescent pornography in return. The court acknowledged his guilt but took into account mitigating factors such as it being his first offense and sentenced him to a suspended prison term.

Criminal cases abusing virtual currency as a means of transaction for various crimes are increasing. Just a few years ago, such cases were rarely encountered in court. Even two years ago, when Son Jung-woo, the operator of the world's largest sexual exploitation site "Welcome to Video," was on trial, the perception of "virtual currency = transaction medium" was still vague.

However, due to the recent surge in investment enthusiasm for virtual currency and the difficulty in tracing accounts, related cases have noticeably increased. A judge from the Financial District Court said, "Cases involving virtual currency combined with investment fraud or multi-level marketing pyramid schemes, which were rare before, have increased to an unimaginable extent recently."

◆ Virtual Currency Providing Anonymity... Used as a Medium for Criminal Transactions = In the past, the primary means of transaction for crimes was undoubtedly 'cash.' Due to the real-name financial system, anonymous transactions were impossible, and even if parties met directly to exchange money, it was relatively easy to catch them because of the extensive CCTV surveillance installed throughout alleys. In contrast, virtual currency eliminated all these risks as a means of transaction. Naturally, crimes using it increased, and recently, the scope has expanded beyond pornography to include phishing and drug transactions.

Recently, money laundering cases using virtual currency have also become common in courts. One example is Mr. A, who was prosecuted for providing virtual currency exchange accounts to accomplices to launder money extorted through so-called "body cam phishing." The court sentenced Mr. A to imprisonment, stating, "Considering his active involvement in the accomplices' enjoyment of profits, the nature of the crime is serious."

Cases involving virtual currency are expected to increase further in the future. This is because 'Darkcoin,' which further enhances the anonymity inherently given to virtual currency, is emerging. Unlike general virtual currencies, Darkcoin does not disclose any transaction information. It renders current tracking methods, which identify electronic wallet owners based on transaction records, useless.

Overseas, Darkcoin is already regarded as having sufficient potential for criminal misuse, prompting heightened vigilance. Europol designated Darkcoin as a "top threat" last year, and the U.S. Internal Revenue Service (IRS) allocated a budget of $600,000 to develop Darkcoin tracking technology.

◆ "A Public Discourse Involving Various Sectors Should Be Conducted" = Experts advise that urgent joint public-private countermeasures are needed against crimes using virtual currency. Seung Jae-hyun, a research fellow at the Korea Institute of Criminology, said, "Instead of just a few lawmakers drafting a bill in the National Assembly, a public hearing involving the government, the National Assembly, and experts from various fields is necessary. This is a matter that requires a careful and steady approach now."

Voluntary regulatory measures by the private sector are also suggested as an alternative. The speed of change in the virtual currency world is unimaginably fast, and if the current legislative process, which usually takes six months to two years, is followed, outdated regulations will be created. Inho, a professor in the Department of Computer Science at Korea University and director of the Blockchain Research Institute, said, "If government officials participate as members of private committees to understand market characteristics, a clear direction can be set when legislating later. Just as the Korea Federation of Banks recently provided guidelines for opening bank accounts, activating private self-regulation can quickly purify the market."