April 24, 2024

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[THE INVESTOR] The Korean authorities are mulling toughened measures to clamp down on cryptocurrency activity, including a complete ban as one of the possible options, Choi Jong-ku, chairman of the Financial Services Commission, said on Dec. 11.

“We are discussing the scope of regulations, including a full trading ban,” he said at a year-end meeting with reporters. “We are putting focus on minimizing negative impacts and reducing excessive speculative trading.”

The comments from the nation’s top financial regulator come after Bitcoin suffered an almost 40 percent plunge in value over the weekend following a news report last week that the government could consider a full ban on cryptocurrency trading.

The most popular virtual money recovered much of the loss on Dec. 11 on the futures launch in the US. The price was hovering at about 19.2 million won (US$17,000) as of 4:40 p.m., up about 28 percent from the day before. 

Choi also stressed that the Korean government would not adopt a licensing system for cryptocurrency exchanges like Japan or allowing the trading of futures contracts like the US, citing different systems and investors’ cultures around the world.

“Is there anything good in it for us to recognize Bitcoin trading? Exchanges earn fees and some investors earn trading profits. But for the whole economy I see no benefits but only side effects,” he added.

The Korean government has maintained a wait-and-see stance on cryptocurrency trading until recently as its intervention could be seen as recognizing them as a viable currency.

But in recent weeks, with virtual money prices on a rollercoaster ride and thousands of people, including teenagers, throwing themselves into their trading, there have been clear reversal indications in the lukewarm stance.

Currently, Korea is the No. 3 market for Bitcoin trading after Japan and the US, with the top-selling virtual currency trading at a premium of more than 10 percent over other major international rates.

In September, Korea already announced it would ban initial coin offerings -- a crowdsourced fundraising that allows companies, especially early-stage startups, to raise capital by issuing their own cryptocurrencies.

But the measure’s effectiveness in clamping down on the trading has been questioned as now more companies are going abroad to launch their new tokens that can be traded in Korea.

Following the ICO ban, the government also outlawed Bitcoin futures recently. Now discussions are underway to make cryptocurrency subject to income tax and income transfer tax in some countries like the UK.

Amid mixed outlook for toughened regulations, the Justice Ministry is expected to take the lead in imposing a complete ban but they are reportedly struggling to find a legal basis.

For a full ban, the ministry is likely to consider cryptocurrency trading as illegal fundraising without permission that can be regulated under the current laws, but there could be disputes over legal interpretations.

By Lee Ji-yoon (jylee@heraldcorp.com)