On Thursday, January 11, 2018, South Korean Minister of Justice, Park Sang-Ki, stated that, “there are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through its exchanges.”
At first glance, this appears to be negative news. After all, South Korea is one of the largest markets for cryptocurrency. The high speculation frenzy taking place in this country has resulted in upwards of 30% premiums in prices compared to other virtual currency exchanges around the world. Thus a potential shutdown of this large market may lead to a significant decline in prices.
However, despite this ominous sounding statement, I believe this announcement refers not to a ban, in the strict sense of the word, of all cryptocurrency trading, but more so to the vision that those exchanges that don’t follow regulations will be banned.
"Korea plans to regard virtual currency trading as a fund-raising business without permission," Financial Services Commission (FSC) Vice Chairman Kim Yong-beom said during a recent meeting with his counterparts from Japan and China in Incheon, as reported in local news sources. Kim means that the financial regulators classify virtual currency trading as an illegal practice, and exchanges participating in this are subject to up to a five-year prison term, unless they comply with regulations. These regulations are expected to include restrictions to provide a safer marketplace for investors to operate in as well as decrease crime related to money-laundering activities.
Additionally, the recent increase in the number of raids on large exchanges, such as Coinone and Bithumb, by police and tax agencies for potential tax evasion, aligns with the government’s previous statements regarding capturing the taxes from this large market.
Thus, based on the recent news and events, I believe that South Korea is not planning on banning cryptocurrency; rather, they are working towards creating a safer marketplace for investors by increasing regulations while hoping to profit from this large market. That drop in Bitcoin’s price upon the initial announcement should recover as more details emerge about this bill.
Please stay tuned for an updated, detailed piece on this story, which will outline what can be expected in this bill.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: I own cryptocurrency - just enough to understand, not enough to retire.