Doing 'Sungeumkkang' with Local Currency?…Local Governments on Alert for Illegal Distribution

Using Discount Rates to Buy and Resell Gold Products for Profit
Special Inspections Launched in Yongin and Hwaseong Cities

Local governments issuing regional currency to revitalize local commercial districts are reportedly experiencing illegal circulation of the currency for so-called 'pure gold kkang' schemes.

On the 24th, according to reports from Yongin-si and Hwaseong-si in Gyeonggi-do, local governments have launched special inspections following a series of suspected 'pure gold kkang' cases involving the use of regional currency, mainly centered around precious metal shops.

Recently, there have been consecutive suspected cases of so-called 'pure gold pawn' in some areas, where people buy pure gold with local currency and then resell it for a profit.
[Photo by Asia Economy DB]

'Pure gold kkang' refers to a method where the 5-7% discount applied when purchasing regional currency is exploited to buy gold products and then immediately resell them for a profit. For example, buying 200,000 KRW worth of pure gold with a 5% discounted regional currency and then reselling it at the same price yields a profit of 10,000 KRW, which corresponds to the 5% discount.

Under current regulations, this is clearly illegal. According to local governments, the following acts are prohibited: ▲using regional currency in specific restricted industries such as precious metals, massage parlors, entertainment establishments, and immoral businesses ▲receiving or exchanging regional currency without providing goods or services (so-called 'kkang') ▲paying with regional currency for amounts exceeding actual sales ▲merchants refusing payment or treating regional currency less favorably than other payment methods such as cards or cash.

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Amid a series of suspected illegal circulation cases, Yongin-si has launched a focused crackdown on fraudulent use of regional currency. Yongin-si will conduct an intensive crackdown on illegal circulation of the regional currency 'Yongin Y- Pay' until the 7th of next month. During the inspection period, the city plans to conduct special inspections and preliminary guidance for 12 local precious metal shops suspected of illegal circulation.

Businesses found guilty of illegal circulation will face administrative measures such as cancellation of Yongin Y-Pay merchant registration and fines. To this end, the city will analyze merchant payment data, specific industries, and frequently reported cases in advance, and will directly visit stores detected through the 'abnormal transaction detection system' to verify illegal circulation.

Hwaseong-si will also conduct a 15-day intensive crackdown on regional currency merchants suspected of illegal circulation in specific businesses from today until the 7th of next month. The main targets are merchants classified under watch and precious metals, and other miscellaneous goods such as jewelry shops or gold shops suspected of 'pure gold kkang.' The city plans to organize inspection teams to conduct on-site inspections of merchants reported through the illegal circulation reporting center.

A Yongin-si official stated, "We are carefully examining merchant payment data to ensure that regional currency circulates properly," adding, "We will continue to enforce crackdowns so that regional currency is circulated according to its original purpose."

Meanwhile, upon detection of illegal circulation, administrative actions such as fines up to 20 million KRW and cancellation of regional currency merchant registration, as well as judicial measures, may be taken. If you discover suspected cases of illegal circulation of regional currency, please report them to the respective local government reporting centers.