We had originally reported that South Korea had plans to ban cryptocurrency trading, but according to government authorities – this isn’t the case. Due to this announcement, there were massive disruptions on trading platforms around the world. The government doesn’t plan to ban the use, but they do plan to tighten the regulation and crack down on illegal practices within the area.
South Korea’s finance minister Kim Dong-yeon said, “customs service has been closely looking at illegal foreign exchange trading using cryptocurrency as part of the government’s task force.” He also noted that it has detected around 637.5 billion won ($596.02 million) worth of foreign exchange crimes – with cryptocurrency forming the bulk of that figure. In one instance, an illegal exchange agency took 1.7 billion won ($1.59 million) from residents in the form of “electric wallet” coins and transferred them to a partner agent abroad. The agent then cashed them out and distributed the balance among clients in that country.
South Korea has been at the forefront of pushing for broad, regulatory oversight of cryptocurrency trading as many locals jumped into the frenzied market despite warnings from policymakers around the world of a potential bubble. Seoul previously said that it is considering shutting down local cryptocurrency exchanges, which threw the market into turmoil and hammered bitcoin prices. Officials later clarified that an outright ban is only one of the steps being considered, and a final decision was yet to be made.
In South Korea, only licensed banks and brokers can offer foreign exchange services. Local companies and residents who move more than $3,000 out of the country at a time must submit documents to tax authorities explaining reasons for the transfers. Annual overseas transfers of more than $50,000 must also be reported with similar documents. This kind of regulation makes sense to me. Given that cryptocurrency is relatively new from a mainstream perspective, I think it’s important that we look at some kind of regulation. Otherwise, there is potential for these kinds of criminal activities to take place. Which is what we want to avoid and that’s why I think regulation is so necessary.
This is a big deal though. I mean, that’s a lot of money potentially not going into the economy, so I can understand why South Korea wants to address this. That said, I don’t think the answer is to ban cryptocurrency – like they had originally said. While I’m not convinced that cryptocurrencies, like Bitcoin, will continue to gain in value. But I think that governments and regulators need to figure out ways to build this into existing systems because the idea of cryptocurrency isn’t going away. How and what it will look like is another idea completely, so I think it’s short-sighted of any government to ban the currency completely. Bitcoin has taken a significant nose dive this month. And while that doesn’t mean it is lacking in value, it is the biggest loss it’s seen since January 2015. That said, I’m glad to see that South Korea has decided to take a look at that original decision.