South Korean banks held almost $2 billion of cryptocurrency in December 2017, according to a report from the country’s central bank.
Local news outlet Yonhap reported that this is equal to approximately 8 percent of the $23.4 billion held by the country’s foreign exchange brokerages.
The bank played down the amount in its official comment: “The amount of crypto-asset investment is not really big, compared with other equity markets, and local financial institutions’ exposure to possible risks of digital assets is insignificant. Against this backdrop, we expect crypto-assets to have a limited impact on the South Korean financial market.”
This is interesting because it comes a few days after the government announced upcoming laws that will accept the blockchain industry as a legitimate business concern for the first time. The new law features detailed classifications for different types of blockchain businesses and will require businesses to work in tandem with the state for the first time.
It has been a bumpy ride for cryptocurrency businesses in South Korea.
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Cryptocurrency is very popular in the country, with millions actively using related mobile phone applications and the country’s biggest cryptocurrency exchange, Bithumb, reporting massive growth in profits.
However the government distrusted the sector and made many attempts to squash it. These efforts were ineffective in curbing public interest, and myriad examples of illegal behaviour led to government to realise that bringing businesses inside the law may be the best way forward.
One example that was particularly embarrassing for the government occurred in January when a government employee sold his cryptocurrency two days before a government announcement caused cryptocurrency prices to tank. In any other context this would be an open-and-shut case of insider trading – the employee admitted that he ascertaining the situation after his supervisor told all employees to refrain from cryptocurrency trading – but the individual was cleared of wrongdoing because there were no laws in place and the action was technically not illegal.
Another example was a recent criminal case involving illegal proceeds denominated in Bitcoin – the supreme court had to step in and redefine Bitcoin before the authorities could legally confiscate the money.
Cryptocurrency exchanges (new classification: ‘encryption asset brokerage and brokerages’) will now be required to obtain approval from various government agencies, and will be under the direct authority of the Financial Services Commission, according to CCN. Many businesses will have to cease operations until they obtain a licence.
South Korean banks will also be glad of this – according to Forbes, they made approximately $2 million profit from cryptocurrency trade commissions last year alone.