The government of South Korea has introduced a new system for cryptocurrency traders. This signals that the authorities there will allow cryptocurrency exchanges to operate in the country without fear of a crackdown. This is a welcome development coming from one of the world’s biggest markets for cryptocurrency trading. The announcement came after a massive backlash against the Ministry of Justice which had announced a cryptocurrency trading ban.
South Korea Strives for Transparency Without a Ban
Hong Nam-Ki, Minister of the office for Government Policy Coordination confirms that regulators are focused on making cryptocurrency trading more transparent rather than instituting an all-out ban on domestic exchanges. The statement can be seen on a video posted on the South Korean presidential website. Moreover, Hong explained the government’s position regarding an appeal by 200,000 Koreans on the official presidential Blue House website of President Moon Jae-in.
South Korean Government Waving the White Flag?
The South Korean government waved the white flag in response to public uproar over the exchange ban by the Ministry of Justice in December. While regulators from various countries are making it harder for cryptocurrency traders to work every day, South Korea is changing its tone somewhat. Responses from global policy makers range between an outright exchange ban in China to a licensing system in Japan. It seems South Korea is pulling back from a Chinese-style ban and moving to the other side of the spectrum.
Keeping a Close Eye
Despite waving the white flag, Hong clarified that South Korean policymakers will keep a close eye on developments within cryptocurrency markets. In December 2017, South Korea released “virtual currency emergency measures” aimed at banks, non-institutional investors and foreigners that were engaging in cryptocurrency trading. The measure intends to impose a ban on miners and foreigners – those who do not reside in South Korea – and financial institutions from buying, securing and investing in virtual currency. These measures were mainly due to concerns over legitimizing digital assets and the implication that might have on illegitimate trading practices. Hong said that Korea is still studying a cryptocurrency tax as well as other measures to prevent wrong-doing and tax evasion.
Above all, South Korea’s government expressed security concerns regarding cryptocurrencies, pointing to CoinCheck’s hack as one of those concerns. In South Korea, Police raided the offices of Bithumb and Coinone, two of the largest cryptocurrency exchanges, due to tax evasion. On the same day, Park San-Ki, South Korea’s Justice Minister announced the government’s opinion on a bill that would ban trading on domestic cryptocurrency exchanges. The Bitcoin hype in South Korea has created a situation in which the market is exposed to wide arbitrage gaps vis-à-vis markets in other countries, and this gives rise to security and additional tax evasion concerns. Nevertheless, it is practically impossible to stem the use of cryptocurrencies altogether, so governments will have to refine their approach and release more nuanced declarations to avoid becoming one of the factors that increases market volatility and sends the industry into the underground.