By Kim Yoo-chul
The government plans to soften its cryptocurrency policy, after financial policymakers from the world's top 20 economies agreed to acknowledge cryptocurrencies as "financial assets" and opened the door to regulating the booming industry at a later stage.
A "tentative" agreement would be a major headache for Korea's top financial regulators and tax agency because they've classified cryptocurrencies as non-financial products or assets due to their speculative nature. It seems apparent Korea will take on the issue by focusing more on its positive aspects.
Financial policymakers of G-20 nations have set a July deadline for the first step toward "unified regulations" of cryptocurrencies. One reason for the move by the G-20 is that they see cryptocurrencies as "too small to jeopardize" financial markets. The combined market value of cryptocurrencies is less than 1 percent of the global GDP.
Korea also agreed to apply to cryptocurrencies the standards of the Financial Action Task Force (FATF), an inter-governmental body formed to fight money laundering and terrorist financing.
"It's almost certain that cryptocurrencies will be classified as assets and the main issue will be centered on how to regulate them properly under the unified frame that will be agreed upon between G-20 nations. Given the current stance, this isn't good, but we will step up efforts to improve things," the Financial Supervisory Service (FSS) said, adding it will develop relevant issues with the Financial Services Commission (FSC). The FSC directs the FSS.
Earlier, the FSS said it would soften its stance towards cryptocurrencies after the government agency's internal study identified some positive aspects to crypto-assets. The FSS official said its governor Yoon Suk-heun will soon release updates on this issue.
The National Tax Agency (NTA) said it's been teaming up with the country's finance ministry to collect taxation data through its virtual currency taxation task force regarding cryptocurrency taxation.
In Korea, cryptocurrency transactions are still tax-free because crypto-trading has no common legal basis here. As the law stands, Koreans are able to profit from cryptocurrencies without being required to pay taxes on them. But it's required for operators to pay income taxes.
The justice ministry also plans to renew talks with relevant government agencies to prepare a set of guidelines to reduce room for exploitation of crypto transactions for illegal activities such as tax evasion and money laundering.
The Bank of Korea (BOK), the country's central bank, said a taskforce to study the possibilities of issuing a central bank digital currency (CBDC) has been operational since January.
"The BOK's recommendation regarding cryptocurrencies will be released by the end of June, at the earliest," a BOK official said Tuesday.
While Korea, the world's third-largest cryptocurrency market in terms of daily transactions, is confused over the country's stance on the cryptocurrency market, some G-20 countries such as Canada are moving closer towards a relaxation of rules.
Korea still bans initial coin offerings (ICOs) and financial regulators have mandated crypto investors pass an identification verification process for trading with their virtual accounts opened at local banks.