Government sets up task force to regulate cryptocurrency
By Nam Hyun-woo
The Moon Jae-in administration established a task force Monday to discuss ways of regulating Bitcoin and other cryptocurrency trading, which has been causing controversies across the country.
The Ministry of Justice, which hosted the first meeting of the task force, said that the government is "aware of the seriousness of virtual currency-related problems and will collaborate to deal with the issues."
Thus far, investments in cryptocurrencies have created a craze here as its prices have shot up. But worries have surfaced that this is creating a bubble that will burst soon and cause great damages to investors.
The country's daily virtual currency trading volume averages 2 trillion won, which is the third largest in the world. On Monday, Bitcoin was nearing $12,000 in value. The leading digital currency has gained more than 60 percent over the past month alone, an annualized return of about 720 percent. Other cryptocurrencies are also on the upswing.
However, the area has not been properly regulated.
It remains to be seen how the government will regulate virtual money exchanges. But the country's financial regulator hinted at introducing a "positive system" -- exchanges are basically illegal but some will be allowed if they meet certain criteria.
"Korea plans to regard virtual currency trading as a fund-raising business without permission," Financial Services Commission (FSC) Vice Chairman Kim Yong-beom said during a recent meeting with his counterparts from Japan and China in Incheon.
Kim means that the financial regulators classify virtual currency trading as an illegal practice, which is subject to up to a five-year prison term.
In detail, the FSC plans to check which exchanges do not meet its criteria. Criteria will include prevention of money laundering, separate management of clients' money and proper explanations of the risks. This means that some exchanges which fully meet those criteria can continue their businesses. Otherwise, they will be forced to shut down.
The FSC plans to table a bill containing this measure to the National Assembly early next year.
The envisioned regulation is similar to that of Japan. The Japanese government in April allowed exchanges' trading only when their identity verification process is appropriate; they prevent money laundering; and they manage clients' money separately.
Another option that Korea could adopt is a license system -- which allows only those with a government license to start a virtual money business.
In July, Rep. Park Yong-jin of the Democratic Party of Korea proposed a bill recognizing digital tokens as financial assets. The bill includes details on requiring virtual currency issuers, brokers and exchanges to get approval from the FSC and have more than 500 million won ($459,000) in capital.
However, FSC Chairman Choi Jong-ku said Monday that the authority is not thinking of a license system.
By Nam Hyun-woo
The Moon Jae-in administration established a task force Monday to discuss ways of regulating Bitcoin and other cryptocurrency trading, which has been causing controversies across the country.
The Ministry of Justice, which hosted the first meeting of the task force, said that the government is "aware of the seriousness of virtual currency-related problems and will collaborate to deal with the issues."
Thus far, investments in cryptocurrencies have created a craze here as its prices have shot up. But worries have surfaced that this is creating a bubble that will burst soon and cause great damages to investors.
The country's daily virtual currency trading volume averages 2 trillion won, which is the third largest in the world. On Monday, Bitcoin was nearing $12,000 in value. The leading digital currency has gained more than 60 percent over the past month alone, an annualized return of about 720 percent. Other cryptocurrencies are also on the upswing.
However, the area has not been properly regulated.
It remains to be seen how the government will regulate virtual money exchanges. But the country's financial regulator hinted at introducing a "positive system" -- exchanges are basically illegal but some will be allowed if they meet certain criteria.
"Korea plans to regard virtual currency trading as a fund-raising business without permission," Financial Services Commission (FSC) Vice Chairman Kim Yong-beom said during a recent meeting with his counterparts from Japan and China in Incheon.
Kim means that the financial regulators classify virtual currency trading as an illegal practice, which is subject to up to a five-year prison term.
In detail, the FSC plans to check which exchanges do not meet its criteria. Criteria will include prevention of money laundering, separate management of clients' money and proper explanations of the risks. This means that some exchanges which fully meet those criteria can continue their businesses. Otherwise, they will be forced to shut down.
The FSC plans to table a bill containing this measure to the National Assembly early next year.
The envisioned regulation is similar to that of Japan. The Japanese government in April allowed exchanges' trading only when their identity verification process is appropriate; they prevent money laundering; and they manage clients' money separately.
Another option that Korea could adopt is a license system -- which allows only those with a government license to start a virtual money business.
In July, Rep. Park Yong-jin of the Democratic Party of Korea proposed a bill recognizing digital tokens as financial assets. The bill includes details on requiring virtual currency issuers, brokers and exchanges to get approval from the FSC and have more than 500 million won ($459,000) in capital.
However, FSC Chairman Choi Jong-ku said Monday that the authority is not thinking of a license system.
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