Regulators pressed to apply measures amid crypto volatility

Financial Services Commission Chairman Eun Sung-soo speaks during his visit to a NongHyup Life Insurance service center in Seoul on April 29. Yonhap

By Lee Min-hyung

The Financial Services Commission's (FSS) lackluster attitude toward the handling of the burgeoning cryptocurrency market here is escalating the confusion felt by investors.

After FSC Chairman Eun Sung-soo shared his ultra-negative views of the booming digital currency market last month, the regulator remains taking a wait-and-see approach, without taking any concrete actions or sharing specific regulatory plans. This passive approach is due to fears that issuing any warnings without a detailed future policy roadmap will end up widening the volatility of major large-cap cryptocurrencies.

But market experts are calling for the FSC to no longer delay announcing regulatory guidelines at a time when central governments from other economic powerhouses ― such as the United States and China ― are taking preemptive steps to minimize market confusion.

For now, it is shifting the responsibility onto commercial banks, urging them to sign partnerships with crypto exchanges based on their own judgment. Major banks, such as KB, Hana and Woori, are not opening any real-name accounts for exchanges due to the risk that they will be held responsible for any financial incidents involving cryptocurrency transactions.

People in their 20s and 30s ― the most “crypto-passionate” age groups ― are particularly expressing discontent over the unclear policy direction at a crucial time as the 2021 presidential election comes closer. The younger generation were already furious over the government's failed real estate policies, and so a growing number of them have jumped into crypto investments in the hope of raising money to purchase apartments whose price have soared nationwide over the past few years.

The FSC is also under pressure from political parties to devise and unveil regulations in a timely manner, so as not to lose them votes in the next election.

The global “crypto market” is in an adjustment period amid a series of recently-issued warnings from global overseers, so calls are growing for the FSC to issue a similar regulatory or future policy stance as soon as possible.

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The prices of cryptocurrencies such as bitcoin and ethereum have been on a sharp decline after the U.S. and China decided to toughen regulations.

The U.S. Treasury Department introduced tougher tax regulations on cryptocurrency transactions, under which any transfer worth over $10,000 (11.27 million won) must be reported to the Internal Revenue Service.

The Chinese government is also on track to tighten restrictions against cryptocurrencies. Starting last week, the country blocked financial payment firms there from operating any services regarding cryptocurrency transactions; and it also warned retail investors to refrain from making speculative digital currency transactions.

Following the announcements from the world's two largest economies, the two major cryptocurrencies underwent two-digit declines.

According to data from Coindesk, the price of bitcoin was $32,677 as of 2:30 a.m. Monday, down 14 percent from the previous day, while etherium also dropped 16.8 percent to $1,914.

Experts said there is a chance that capital from the cryptocurrency market will flow into the stock market amid the fall in the value of digital assets.

“With the major cryptocurrencies entering a bear market, some existing crypto investors may withdraw their capital there and turn their eyes to the stock market,” said Korea Capital Market Institute economist Hwang Sei-woon.

Early this year, a number of retail investors in the stock market flocked to the cryptocurrency market amid projections that the benchmark KOSPI would not be able to maintain its bullish performance throughout the year.

“But the stock market here is also undergoing an adjustment, so the capital withdrawn from the crypto industry may remain as floating money for the time being,” he said.