Following three months of investigations, the government has finally dropped charges against Bithumb, the second largest cryptocurrency exchange in South Korea. Local financial authorities and the National Tax Service (NTS) found no evidence of illegal operations like tax evasion, according to an official statement on June 8.
Bithumb has been involved in extensive investigation since January, when different government agencies, such as NTS, Korea Financial Intelligence Unit (KFIU), and Financial Services Commission (FSC) started checking the company’s financial records. This week, the agency unveiled they closed the investigation back in April due to lack of evidence of fraudulent activities and ordered Bithumb to pay a $28 million tax.
According to the NTS, the review was launched after the agency noticed huge earnings the exchange received from digital currencies trading and transaction fees. The exchange recorded a 171-fold growth in revenues in a one-year period, driven by an increase in virtual currency demand in the Korean market. This urged the agency to ensure the company doesn’t hide some of its financial holdings.
In the beginning of January, the NTS together with other government officials visited the exchange’s headquarters in Seoul and seized all data necessary for the investigation, including various devices and computer documents. During the three-month investigation, the regulators reviewed the company’s transaction history and balance sheet to assess its tax payouts.
“The NTS has conducted an audit of Bithumb’s accounting record for the 2014-2017 business years,” said a spokesperson for the agency. “The exchange has paid all the related taxes and fees without any objection. Although a large tax amount was imposed, no implication of tax evasion was found, so the NTS cleared the charges and officially closed the investigation.”
The clearance of the trading platform has definitely improved situation within the cryptocurrency sector in South Korea, bringing legitimacy to the market and boosting investor confidence.
Bithumb is now one of the second biggest cryptocurrency exchange in South Korea after Upbit. Last year, it generated 333 billion won in sales and 427 billion won in net profit, demonstrating a huge surge from 2016 when it gained 4.3 billion won in sales and 2.5 billion won in net profit.
In a move to improve transparency of its business operations, the company recently shut down cryptocurrency trading operations in 11 countries now blacklisted by the Non-Cooperative Countries and Territories (NCCT), including North Korea, Iraq, and Iran. Bithumb will no longer register users from these countries in order to prevent money laundering, terror funding and other illicit activities.