Gov't faces setback over cryptocurrency trading ban
By Kim Yoo-chul
The latest announcement by top financial regulators that they may ban all cryptocurrency transactions is stirring up controversy in the financial markets as critics say a complete stoppage of trading through exchanges would chill investor sentiment in the next wave of technology developments.
The Financial Services Commission (FSC), the country’s top financial regulator, said it wasn’t ruling out the possibility of “an all-out ban” on cryptocurrency trading here as Koreans’ growing exposure and active involvement in cryptocurrency trading is causing “great setbacks” the government can’t ignore.
In a recent meeting with reporters, FSC Chairman Choi Jong-ku has reaffirmed the agency’s firm stance toward cryptocurrency trading saying; “Cryptocurrencies aren’t financial products, nor financial services, nor money or currency.”
The FSC is teaming up with the justice ministry, tax agency and other related ministries to tackle the issue. Cheong Wa Dae is also involved in the moves to map out upcoming restrictive measures for cryptocurrency trading, according to sources.
Unlike reports, however, sources who are knowledgeable about the issue say it’s unlikely that the government will announce measures such as a complete ban on cryptocurrency trading as ministries are divided on whether there is a firm legal basis to do this.
“The use of digital tokens in trading has both opportunities and risks, and the Ministry of Strategy and Finance has agreed that a full ban on cryptocurrency exchanges could kill innovation in upcoming technologies. But given the many criminal cases related to this trading, the justice ministry hopes to speed up talks to set up the legal basis for tough regulations, while the tax and anti-trust agencies want to have more time,” said an official at the Fair Trade Commission, asking not to be identified.
Analysts and market experts say a complete ban on cryptocurrency trading could hinder local startups and companies that work with cryptocurrencies and blockchain technology but don’t have the sufficient funds.
The Moon Jae-in government is making efforts to grow an ecosystem of local startups as part of its initiatives to cut the country’s long-time heavy reliance on business conglomerates.
Meanwhile, the Fourth Industrial Revolution is opening up opportunities for all, including small- and medium-sized enterprises (SMEs), if they are properly prepared and are ready to take chances.
According to government data, Korean startups raised nearly $90 million in sales of digital tokens in September alone though “initial coin offerings” (ICOs). More than 20 Korean startups plan to raise seed money though ICOs as these require little paperwork.
“If the government applies a complete ban on cryptocurrency trading, then I can say the results will be disastrous. Blockchian-based cryptocurrencies could be used as a new accelerator if the upcoming measures are aimed at reducing the side effects from transactions, and speculative investment can be significantly reduced,” said Oh Jeong-keun, a professor at Seoul’s Konkun University. “Rather than regulating cryptocurrency exchanges, the government may offer licenses to qualified cryptocurrency exchanges to help investors trade them.”
Oh remained negative about the effects of strong regulation on cryptocurrency trading. “You can send capital assets anywhere you want; therefore, a decision to heavily regulate cryptocurrencies would have very few benefits, while bringing down new industries.”
Korea is the world’s third-biggest market in Bitcoin trading after Japan and the United States and the largest exchange market for Ether, Ethereum’s cryptocurrency, with an over 33 percent market share. Meanwhile, the country is home to two of the top 15 global digital currency exchanges, both of which have built walk-in centers where investors can conduct transactions in-person. It is believed to have about 1 million registered daily traders in virtual currencies, which is equivalent of one in every 50 citizens.