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Is Investing in Cryptocurrency Actually the Same as Gambling?

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If you’re a Bitcoin investor, today isn’t a good day.  A top official from South Korea has just said that the government is preparing a bill to ban the trading of cryptocurrencies on exchanges.  This announcement just came after the country’s financial regulator started inspecting some of South Korea’s largest financial institutions that help facilitate digital-currency trading.  Because of this, Bitcoin prices dropped as much as 13.7% and falling more sharply on Korean exchanges.  The reason for this?  The government is coming up with a series of measures aimed at eliminating anonymous trading of cryptocurrencies.  They are also alleging that investing in cryptocurrency is the actually the same as gambling.

Minister of Justice Park Sang-ki had the following to say:

“Cryptocurrency trading is looking similar to speculation and gambling.  South Korea’s [cryptocurrency] trade is considered abnormal abroad.”

He is referring to how local investors have often paid higher prices for Bitcoin and other virtual currencies on the country’s exchanges compared with other major global trading venues.  Market participants have named that gap the “kimchi premium”.  Earlier this week, South Korea’s National Tax Service began investigations on the country’s leading virtual currency exchanges, Bithumb and Coinone.  Bithumb confirmed that the authorities had visited the company’s headquarters but declined to comment on the details of the investigation. Coinone, which is undergoing a separate police investigation for allegedly offering gambling services on its exchange, also confirmed the investigation by the tax authority.

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There are more than a dozen cryptocurrency exchanges in South Korea.  The proliferation of virtual currency and this recent trading frenzy has raised eyebrows among regulators globally.  Even though, many central banks have refrained from supervising cryptocurrencies themselves. The worst part about this?  Some investors have taken preemptive action.  A 23-year old investor stated, “I have already cashed most of mine (virtual coins) as I was aware that something was coming up in a couple of days”.  Which isn’t a good thing for the currency in general.

So why is this a concern for South Korea?  Well, they feel that the surge in Bitcoin is bringing people to invest, but their worry is that it’s going to get people “hooked” on gambling.  According to Investopedia, gambling is defined as a game of chance where you choose to trust your gut that buys placing money in a particular game you will receive a sizable monitory winning at the end of the game. People love it because it gives you an adrenaline rush while placing considerable returns in your pocket.

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Is it fair to say that cryptocurrency trading/investing is similar to gambling?  Some economists believe that investing is placing your money in a growing asset with the aim of gaining a profit as a return.  The key to both is that there are positive returns.  Many say that you “play” the stock market, so is it just a game?  Yes and no.  I think, for the most part, gambling is a game of chance.  You don’t necessarily know what the outcome is going to be.  That said, people who invest in cryptocurrency also don’t know what the outcome is going to be because this concept is relatively new.  I’m not sure that South Korea sound ban cryptocurrency because of a possible correlation to gambling, but their ban is going to continue to send the market into a frenzy.

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