South Korean government Cracks-a-Whip on Cryptocurrency Activities in the Country
Amidst growing speculation of a bubble in the cryptocurrency markets due to its lightning-fast growth in past few months, South Korean government and regulatory bodies have introduced new rules to curtail cryptocurrency activities in the country. South Korean prime minister Lee Nak-yon has expressed worry over the rising interest in cryptocurrency saying that it could “lead to some serious distorted or pathological phenomenon.”
The new measures released from the Office for Government Policy Coordination includes levying of capital-gain taxes on cryptocurrency trades to restricting all other activities that include “storing, managing, acquiring, exchanging, trading, arranging, arbitrating and issuing virtual currency.”
In addition to this, local publication Korean Herald reported that “banks in Korea that provide virtual bank accounts for cryptocurrency trades will have to verify the identity of account holders when creating new ones,” as per the plan. Also, the measure includes a ban on foreigners and minors for trading in virtual digital currencies and trading in banks accounts in the country.
If the measures are approved, South Korean cryptocurrency exchanges will also be subjected cybersecurity more specifically in the area of data loss and data theft. Moreover, exchanges, which hit more than 1 million daily users or more than 10 billion won in daily trading will be required to take special approval from the Korea Information Security Agency.
Such regulatory measures can have a severe impact on the exchange as South Korea is one of the major Asian countries that contribute significantly to the daily trading activities. South Korea-based Bithumb is one of the world’s largest trading exchange by volumes on any given day. However, the exchange has welcomed the move from the government and in an email to Reuters, it commented “A right set of regulations will rather nurture the (virtual currency) market, and we would welcome that.”
Echoing similar thought, Thomas Glucksmann, head of marketing at Hong Kong-based exchange Gatecoin, said “The regulations in Korea will not have a negative effect,” but on the contrary “licensing brings certainty, which encourages already regulated entities ... to get involved in addition to sceptical retail investors.”
Moreover, the government also plans to introduce a formal ban on Initial Coin Offerings (ICOs) - a decentralized manner of raising funds through blockchain technology. Also, measures against any other marketing schemes that promote cryptocurrencies or digital currencies can also be introduced. Reports suggest that additional measures will be taken on the illegal use of industrial space for doing any sort of mining activities.
At the end, the official clarified that concluding the above measures the government doesn’t wish to create barriers around the development in blockchain activities. According to a translation, the government statement said: "In addition, we will continue to rectify the side effects of virtual currency speculation, but we will make balanced policy efforts to ensure that government measures do not hinder the development of technology such as block chains.”