South Korean Crypto Regulations: Reasons to be Optimistic
The eyes of cryptocurrency world remain fixed on South Korea, whose potential ban on digital currency trading could change the market beyond recognition. However, certain considerations suggest that a blanket prohibition may not be on the cards.
South Korea has an insatiable appetite for cryptocurrencies. The progressive country makes up about 1.9% of the global economy and about 30% of the global crypto economy. This disparity is what troubles the Korean central authorities.
The incredible interest in all things crypto comes at a time when the political climate in South Korea seems to be dominated by two main distrust issues.
Firstly, former President Park Geun-hye was not only impeached but put on trial on charges of corruption and blackmail. The scandal has engulfed some of the largest companies in the country, including Samsung. Park stands accused of abusing her power by pressuring major corporations into paying bribes to receive preferential treatment for government contracts.
The second issue is, of course, the persistent uncertainty over the North Korea situation. The demilitarized area between the two states is only 35 miles away from South Korea’s capital, Seoul, and there are concerns about what might happen to money held in central banks if an act of aggression were to escalate.
Will South Korea attempt to shut down cryptocurrencies?
Due to their decentralised nature, it is very difficult to outlaw cryptocurrencies. The market grew six times when China attempted to shut down local digital currency operations in 2017.
Beyond the economic implications, this has become a very emotionally charged political topic. One survey found that 35% of South Koreans oppose government attempts to regulate the market. The results also showed that 62% of respondents have experience in trading virtual currencies.
Moreover, an anti-ban petition recently exceeded 200,000 signatures within the statutory timeframe of one month, which is the number required to compel a response from the presidential office. Officials are expected to address the issue within 30 days.
Update: 204,671 signatures as of noon today -- the website says "the people will ask, and the state will answer." If a petition reaches 200k w/in a month, a government official will present a response on the Cheong Wa Dae Youtube channel https://t.co/PddVlwrp0d
Korean exchange Bithumb welcomes the ‘right’ regulations
Bithumb, the world’s largest virtual exchange by trade volume, believes that regulation in appropriate doses will help the market grow and legitimise itself.
“A right set of regulations will rather nurture the (virtual currency) market, and we would welcome that,” Bithumb told Reuters in an emailed statement.
Koreans are not passive contributors to this economy either. This is demonstrated by the brilliant blockchain solutions coming out of the country. Pound-for-pound, Korea is easily the biggest supporter of the market.
Korean coin Icon (ICX) is currently the 16th biggest crypto project in the world, with a $3 billion market cap. Such innovation and support are a testament that the country is voting on this issue with its minds and wallets.
Cryptocurrencies ban is ‘unrealistic’
This is the opinion of Kim Sang-jo, chairman of the South Korean Fair Trade Commission (FTC).
"There is no applicable legislation [to ban cryptocurrency exchanges]. Any violation of the electronic commerce laws is not enough in itself to legally force the closure of cryptocurrency exchanges."
What will happen from here?
This is the trillion-dollar question, and no one can be certain of the answer at this point. However, it seems increasingly unlikely that a blanket prohibition will be imposed, and if it were, it is even more uncertain how that would work.
Neighbouring countries such as Hong Kong and Japan are very supportive of the digital currency movement, and the “borderless” money would very quickly and frictionlessly transfer to these markets, just as it did when China attempted a similar ban. An ideal outcome would be regulations that propose stronger control on the identity of investors but support the decentralised nature of the so-called new economy.