Local court confiscates Bitcoins

By Kim Yoo-chul

While the government maintains that it doesn’t guarantee the proper value of cryptocurrencies as they are neither currencies nor financial products, a local court has ruled that it is appropriate to confiscate cryptocurrencies.

The Suwon District Court ruled Wednesday that it was appropriate to seize 191 Bitcoins, the worth of which was estimated at some 2.42 billion won, as the profits were gained from running adult (pornographic) websites.

The case involves a person surnamed Ahn, who was indicted for operating pornography sites, which had some 1.4 million registered members. Pornography is illegal in Korea and lots of adult websites such as videos or red tube are blocked.

Ahn was arrested last year for taking membership fees with Bitcoins, which the court believes is illegal. The Southern Gyeonggi Provincial Police Agency “seized” Ahn’s 191 Bitcoins. It was the first time here for a local enforcement agency to confiscate digital tokens which were gained from illegal activities.

“It’s appropriate to confiscate 191 Bitcoins as these were the profits from criminal activities,” the court said in its ruling.

One interesting point is that the latest ruling in the appeals court was the major reversal from the lower court ruling. The Suwon district court ruled last year, “Bitcoin is not subject to confiscation.”

The court regarded cryptocurrencies as “actual assets,” which have monetary value. The ruling added, “The criminal profit prevention law includes all types of properties, not just cash but goods which have economic value based on conventional social ideas.”

The court said while Bitcoins are not “physical goods,” they are used to sell and trade in offline markets and cryptocurrency exchanges. “Actual transactions are happening. Cryptocurrencies have economic value,” said the ruling.

Attorneys said the latest ruling doesn’t necessarily mean that the court has given legal authority for digital currencies or confirmed their status as official currencies.

“The ruling just showed that cryptocurrencies are assets and law enforcement agencies can seize or confiscate them if profits are in accordance with criminal activities,” Suk Keun-bae, an attorney at Shin and Kim lawfirm, said.

Talks are underway between relevant government offices regarding how to further regulate the booming domestic cryptocurrency markets. A real-name trading scheme has been effective since Tuesday in order to prevent money laundering.

Now, the finance ministry is teaming up with the National Tax Agency and financial regulators to fix a set of taxation guidelines, which will require crypto-traders to pay capital gains tax on profits that were earned from crypto-trading.

Other than these moves, the country has no clear legal grounds on cryptocurrencies.

Finance Minister Kim Dong-yeon said late Wednesday that a task force which is under direct control of the country’s prime minister is handling all cryptocurrency-related issues. “Because this issue is linked to societal, legal and policy fronts, the government is asked to announce comprehensive and applicable plans.”