Virtual money paints Moon administration into corner
By Kang Seung-woo
The Moon Jae-in administration is zigzagging on what steps to take to cool the overheating cryptocurrency frenzy, as it appears to be at a loss on how to tackle the issue.
The government’s missteps could make the local market more volatile and risky. Furthermore it could take a heavy toll on Moon’s presidency, analysts said.
Korea is the world’s third-largest digital token market after the United States and Japan and cryptocurrency is becoming a buzzword nationwide, raising fears of a price bubble.
The defining moment laying bare the government’s inability came Thursday when Justice Minister Park Sang-ki threatened to shut down all cryptocurrency exchanges in the country, likening its trading to “gambling or speculation.”
His announcement was backed up by Financial Services Commission (FSC) Chairman Choi Jong-ku who said he was “on the same page with Park.”
Their remarks led bitcoin to plummet as much as 21 percent to 17.79 million won ($16,900) at one point that day.
However, Cheong Wa Dae reversed the statements hours later after facing an online uprising against the plan, saying the shutdown was just one possible measure being considered by the government, and a decision had yet been made.
Finance Minister Kim Dong-yeon also said Friday that a trading ban needed more consultation.
As of 2 p.m., Sunday, the leading digital cryptocurrency was trading at 19.5 million won.
“The government’s premature crackdown on cryptocurrencies before finalizing its decision will only create unnecessary uncertainty in the market,” said Sung Tae-yoon, a professor of economics at Yonsei University.
“Although the government needs to take measures to boost the transparency of cryptocurrencies and prevent speculative trading, the shutdown plan went too far.”
To make the government’s situation worse, many investors in cryptocurrencies are in their 20s and 30s who were the key support base for President Moon in the May presidential election. In that respect, there are many dissenting voices inside Cheong Wa Dae regarding the government closing down exchanges.
The nation is scheduled to hold local elections, June 13, to pick 17 mayors and governors as well as numerous local council members and education chiefs.
“After facing a backlash from 20 and 30-somethings, Cheong Wa Dae emphasized the shutdown was not a final decision, admitting that the government is struggling to hammer out an agreement on the issue,” said Kim Hyung-joon, a professor of political science at Myongji University.
Meanwhile, the financial authorities said Sunday they were seeking to fine cryptocurrency traders who refuse to convert their virtual accounts into real-name ones.
According to their plan, cryptocurrency investors will be allowed to convert their virtual accounts into real-name ones within this month.
However, it has yet to be determined how much they will be fined if they don’t.
In 1993, violators of the country’s real-name financial transaction system were slapped with fines amounting to 60 percent of their financial assets.
Currently, banks are not allowed to offer virtual accounts, which are needed to sell or buy cryptocurrencies, to individual customers; the latest measure to help prevent speculative investment in virtual coins.
Opening anonymous cryptocurrency accounts is also banned until banks install a system that ensures only real-name bank accounts and matching accounts at cryptocurrency exchanges can be used for deposits and withdrawals.