South Korea Mulls NY-Style Crypto Exchange Approval System

South Korea is planning to implement a new cryptocurrency exchange approval system modeled after New York's BitLicense.

South Korea is weighing the implementation of a new cryptocurrency exchange approval system modeled after the New York State Department of Financial Services’ (NYDFS) BitLicense. The plan signals that Seoul is softening its stance on digital currencies, going from threats of closure to calls for safety regulation.

BusinessKorea said that move would likely be made in June after the local elections. According to an anonymous official on the cryptocurrency task force that is currently reviewing South Korea’s policy:

“We are positively considering the adoption of an exchange approval system as the additional regulation on cryptocurrencies. We are most likely [to] benchmark the model of the State of New York that gives a selective permission.”

Under NYDFS’ BitLicense, only virtual currency exchanges that have been issued a charter or license can operate in New York. The system sets restrictive controls and high capital requirements that only six companies have met and secured approval to operate. So far, the NYDFS has issued licenses to Coinbase, Circle Internet Financial, Bitflyer USA and XRP II, while Itbit Trust Co and Gemini Trust Co have been granted charters.

According to the report, cryptocurrencies would be integrated into South Korea’s institutional system once the government adopts the New York model, at the same time giving state regulators the proper tool for managing and supervising the industry in a more “orderly manner.”

Cryptocurrency speculations subsiding

South Korea's change of heart is largely due to waning speculation in virtual currency trading. In addition, the government sees no need to regulate the cryptocurrency market “unless it has become excessively overheated,” the report said.

In late January, South Korean finance minister Kim Dong-Yeon said the government would drop plans to ban cryptocurrency trading, pushing instead for the regulation of digital currency exchanges.

A few days later, the minister announced that cryptocurrencies could change the world and did not hide his enthusiasm for blockchain technology and its applications.

He stated:   

“The blockchain has potential as one of the core infrastructures of the fourth industrial revolution. There are still concerns regarding technical developments and more security measures, but the development of blockchain can really change the world.”

The finance minister also dismissed any suggestion of blocking cryptocurrencies trades in the country.

“We’re not thinking about eliminating or suppressing virtual currency. Blockchain technology is an important pillar of the fourth industrial revolution, so we will develop it if we are interested and need it,” he added.