South Korea’s Movements In Regulating Cryptocurrencies (Good & Bad)

The market value of Bitcoin and other cryptocurrencies surpassed the $500 billion milestone last week. The huge amount of growth in the volume of trades in Bitcoin has attracted regular investors to buy the asset, even those without technical knowledge or a real interest in the blockchain. South Korea stands out from the rest in this regard, with citizens from all walks of life using trading platforms in the hopes of making some easy money.

The huge influx of ordinary investors to the cryptocurrency market has sounded the alarm by officials in South Korea, but investors don’t seem to have noticed. South Korea is the second largest economy that trades in Bitcoin, which is just before Japan and after the United States.

In response to this, South Korean regulators are now eagerly waiting to clamp down on domestic exchanges. It’s estimated that more than one million users a day buy and sell cryptocurrencies online, which has given the government a lot to worry about.

South Korea’s ICO Ban And Tax Regulations

South Korea’s Financial Services Commission, or FSC, outlawed initial coin offerings in September. However, that decision was reversed on the premise that ICOs will now be heavily regulated. The Financial Supervisory Service of South Korea has also announced that it is reviewing the trade of cryptocurrencies within the country’s borders.

There have been talks of implementing what’s called the Value Added Tax or a capital gains threshold for cryptocurrency transactions. If this tax proposal is implemented, South Korea will join a contingent of other nations that have taxes on the value of digital tokens.

Another problem for authorities in South Korea is the heightened pace and severity of cyber attacks and sabotage by its neighbor North Korea. It seems that the objective of this reclusive state is to steal and convert Bitcoins into fiat currencies (such as the US dollar). This appears to be one of the nation’s priorities, as it has already penetrated a key crypto exchange in South Korea.

South Korea has suspected that North Korea could be targeting domestic exchanges in their homeland. To combat this, North Korean banks are now prevented from opening cryptocurrency accounts for minors, nor will anyone be able to start an account without going through a stringent identity confirmation process. In the wake of the recent hacks by North Korea, the Woori bank and the Korea Development bank are anticipated to close all virtual bank accounts by the nation by the end of this year.

To address the concerns of cyber attacks on their home soil, South Korea has worked to enhance the storage security of their servers and strengthened their security keys. They also work to verify the legal names of their customers, and disclose buy and sell transactions on a public ledger.

South Korean Crypto Exchanges Legal Requirements

South Korea has outlined the steps needed for its residents to trade cryptocurrencies legally within its borders:

• Each exchange must store their customer’s tokens separate to each other.
• Exchanges must disclose the investment risks to their clients.
• Identity documents must be provided that confirm their user’s residential address and full-name.
• An anti-money laundering process must be implemented.
• All cryptographic keys must be dispersed and optimized.
• Each trade must be recorded on a ledger that is available to the public for free of charge.
• If a trade involves malpractice or fraud, severe penalties should be levied against the exchange.

Effect Of Southern Korean Emergency Measures

In addition to the above guidelines, South Korea has drafted some emergency measures into law to help solidify their crypto regulations.

• The emergency controls by South Korea will clarify safety issues and could help curb the threat of cyber attacks.
• Underaged people can no longer buy or sell cryptocurrencies on South Korean exchanges.
• Any gains made by trading in cryptocurrencies will incur taxes.
• Foreigners who live are not residing within the South Korean border will not be able to buy or sell currencies in its domestic exchanges. This means that other countries will not have access to the tokens offered.

To summarize, the extra laws and policies set in force by South Korea claim to protect and ensure the livelihood of South Korean citizens. A claimed benefit is that every trader will have a better, and more transparent trading experience.

The downside to these new laws? The number of trades on domestic exchanges in South Korea will be substantially lower when compared to other nations. Also, overseas investors will not be able to buy or sell currencies in the country. This additional step was taken by authorities to reduce the impact of phishing scams and hacking attempts on their native soil.