After a week of contradictory messages from Seoul, there is finally an indicator as to where the South Korean regulator aims to go with regard to cryptocurrencies.
Joyce Kim, co-founder of payment network Stellar, announced in a Twitter message that the South Korean government has finally decided not to ban Bitcoin exchanges, citing South Korean news source Daum.
BREAKING: Korean govt will regulate bitcoin exchanges but not ban them. Exchanges will have 6 reasonable requirements on KYC/AML, key storage, separation of fiat into 3rd party accounts, consumer warnings abt trading, transparency of orderbook. GOOD NEWS!https://t.co/6X5S2JBNol
— joyce kim (@joyce) December 12, 2017
The stance of the South Korean authorities regarding cryptocurrency has been highly changeable this year, so this is a positive sign for the industry.
Prime Minister Lee Nak-yon recently expressed concern about cryptocurrency: “…young Koreans including students are jumping in to make quick money and virtual currencies are used in illegal activities like drug dealing or multi-level marketing for frauds. If we let things continue, I feel some serious pathological phenomenons could occur.”
Despite his misgivings, the industry is popular in the country, not surprising given the highly developed economy and the seriousness with which South Koreans take gaming. According to market tracker Coinhills, the country accounts for about 12 percent of global Bitcoin demand – third highest after Japan and the US.
China had been the biggest trading arena for cryptocurrency in Asia, but as the government began to crack down on exchanges, traders shifted to South Korean venues, creating a massive spike in usage. The country’s three biggest exchanges, Bithumb, Korbit and Coinone, are among the largest in the world.
In response to this, in July three bills were brought to the government to regulate trading, and two days later, as if on cue, hackers stole personal data from 30,000 customers of Bithumb, the country’s largest trading venue.
Shortly after this, the oldest bank in the country (and second largest) announced the development of a virtual safe for people to store their Bitcoin wallet keys.
In September, the Financial Services Commission, the South Korean regulator, took a hard line, banning ICOs on pain of “stern penalties”. FSC Vice Chairman Kim Yong-beom said: “The intention is to prevent consumers from damaging the market because they are overheating due to a surge in demand for speculative receivables, triggered by an increase in ICO fraud.”
However, the industry was not to be denied, and in November the FSC began drawing up proposals to allow trading under strict supervision, as the surging price caused the government to reconsider its stance once again.
Today’s move towards legalisation is a positive step for the industry. Of note, Daum reports that the punishment for infringement of the law has also been raised. If the six conditions laid out in Kim’s tweet (see above) are not met, up to 10 years imprisonment or a fine of up to 500 million won (USD 459,100) await the transgressor.