April 20, 2024

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[THE INVESTOR] Despite the recent regulations stipulated by the Korean government to put a damper on cryptocurrency trade, related markets appear to be mostly unaffected with the exception of minor corrections.

“The latest measures won’t have much impact on us as we are already very careful with minors and foreign investors,” an official at BTC Korea.Com who declined to be identified told The Investor on Dec. 14. “But they could hurt smaller and unorganized platforms which allow teenagers to trade virtual currencies.”

On Dec. 13, the government unveiled a set of measures including banning foreigners and minors from opening a new account and those who already own cryptocurrencies are not allowed to make additional purchases. The government also warned that it will review possible taxes on cryptocurrency investments. 

Related:
Korean banks clamp down on cryptocurrency trading services
Korea considers complete ban on Bitcoin trading
Korea mulls allowing partial bitcoin trade


But the market appears to be relieved because a blanket ban suggested by the Ministry of Justice was not adopted.

After falling about 3 percent this morning, the price of Bitcoin recovered its earlier losses by inching up 0.15 percent to 18,300,000 won (US$16,836) as of 1:07 p.m. Other cryptocurrencies such as Ethereum and Dash also gained. EOS, a cryptocurrency that began trading on Bithumb on Dec. 14, also doubled its price.

Meanwhile, cryptocurrency market watchers are crying foul about the government’s clampdown that called for banks to stop issuing virtual accounts for digital currency exchanges. Shinhan Bank -- the most active in cooperating with cryptocurrency exchanges -- Woori Bank, Korea Development Bank and Industrial Bank of Korea said that they plan to stop virtual accounts services to their cryptocurrency partners on government requests.

“This is perplexing because the use of virtual accounts was a government initiative,” an official at a cryptocurrency platform told The Investor on condition of anonymity. “We were close to signing a contract with two major banks for virtual account services but yesterday morning they told us they cannot go ahead with the deal. If all banks close their virtual accounts services for cryptocurrency platforms, then the platforms will go out of business due to a lack of alternatives.”

There are some other ways to transfer money for trading in cryptocurrencies, but most transactions are done via virtual bank accounts. As an increasing number of local banks are closing their virtual account services, exchanges are looking for alternatives to make it possible to open new accounts and continue their services. 

“We are reviewing alternative methods. Even if we cannot use virtual accounts, there are ways we can make sure that there are no obstacles for opening a new account or making transactions,” said the BTC Korea.Com official, without elaborating.

Tony Lyu, CEO of third-largest exchange Korbit, declined to comment on the recent regulatory measures and how it would cope once the quota for its virtual accounts from Shinhan Bank, the only bank that has provided the exchange virtual accounts, run out.

By Park Ga-young (gypark@heraldcorp.com)