Korean premium in a nutshell

I recently interview with the Wall Street Journal's reporter about Korean premium in Cryptocurrency market, and I get some emails about the possibility of the arbitrage between Korea and the other countries.

Korean premium means the price of coins at Korean exchanges is higher than other major exchanges. Korean premium had been noticeable in March, 2017 as far as I have known. The premium had been increased by 50% in May, and it had been disappeared after after coins are all crashed due to the Bitcoin hardfork issue. About a few weeks ago, you could see the Korean premium again and it has been increased little by little. It crashed when Korean government consider restricting Korean exchanges, but the regulation proposal did not impact the price at all since nothing has been changed. The Korean premium has been increased again since then. Today, the premium is about 20%.

If someone asks whether the arbitrage is possible, I would say "yes, it is", especially like now, 25% premium. Although it is, you might need trust person in Korea since they now have the rule that only Koreans are able to use Korean exchanges following their regulation proposal. (http://blockchainnews.co.kr/news/view.php?idx=417)

However, the premium still exists when the arbitrage is possible. This strange situation is caused by various reasons.

1. The arbitrage is not easy - bubble could be gone anytime, so it would be afraid to act arbitrage. Also, there is slow transaction between exchanges although the withdrawals and deposit at the Korean exchanges are pretty fast.

2. Speculation in Korea - Bitcoin has been exposed to Korean TV, lately.

3. Money Laundering - When premium increases, it inclines slowly but constantly. There is still high demand on the side of Korean exchanges when the premium exists, even 20%. Korean exchanges are not under regulation by Korean government. three major exchanges in Korea had more volume than Korean stock exchanges, KOSPI, but the recent regulation proposal of cryptocurrency market seems like they do not want yet to regulate the Korean exchanges. U.S. and Japan's exchanges are under regulation by their government. For example, IRS received the records from Coinbase.

Since Korean exchanges went by wayside, money laundering or illegal inheritance could proceed throughout Korean exchanges using anonymous coins like Dash, Monero, Zcash. On 29th September, Korean premium went down from 10% to 3%, but Dash, Monero, Zcash went up by 30% all the sudden. Recently, EU names Korea as tax hevens blacklist. (http://money.cnn.com/2017/12/05/news/tax-haven-eu-blacklist/index.html), and none of them on the blacklist has as high GDP as Korea. Strong demand of KRW could be one of the reason that people do money laundering through Korean exchanges and they require KRW.

Korean premium will persist until Korean exchanges are under regulation. By then, you might see this ridiculous premium and slightly high premium on anonymous coins, particularly XMR today.