Regulatory framework needed to check speculation
A craze for betting money on digital currencies has shown little sign of abating despite a government plan to work out measures to regulate the trading of bitcoin, one of the representative cryptocurrencies. The digital coins market became more volatile than ever after the Moon Jae-in administration formed a taskforce for possible regulatory steps last week.
This year the bitcoin price surged as high as 25 times as investors, including office workers, housewives and even high school students, rushed to purchase the cryptocurrency for wild gains. It briefly hit a record high of 24.79 million won at a local exchange Dec. 8, buoyed by expectations for Sunday's debut of bitcoin futures trading on the Chicago Board Options Exchange. But the price tumbled about 40 percent in Seoul over the weekend on fears of the regulatory move.
Considering the bitcoin frenzy, the financial authorities should have taken timely and proper measures to avoid a bubble in the digital money market. But they have so far taken a hands-off stance without recognizing any cryptocurrencies. The government has neglected its duty of stemming the speculative orgy.
The bitcoin rage has already gone beyond speculation. It has turned into nothing more than gambling and its bubble will inevitably pop suddenly at some point in the future, though probably not right now. Some skeptics compare the speculation in digital money to a Ponzi scheme, a fraudulent investment operation that generates returns for earlier investors by swindling new investors out of their money.
The local bitcoin market is exposed to higher risks than any other exchange around the world. It is the world's largest bitcoin exchange with its trading volume accounting for 20 percent of the global total. Bitcoin is usually traded at a 20-30 percent premium in Korea compared to other countries.
There is no doubt that the craze is based on an irrational belief that the virtual currencies will continue to go on an upward march. Bitcoin investors must be pursuing a get-rich-quick mentality. It is foolish to believe that digital money is the goose that lays the golden egg.
The authorities need to take comprehensive regulatory measures to stop people from cherishing such an errant perception about digital currencies which can be an alternative payment solution to conventional methods. They should realize that any expedient steps will not stop the risky speculative spree.
Policymakers also need to lay the legal foundation for the development of digital currencies and their related technologies such as blockchain, a decentralized electronic ledger technology that underpins bitcoin. The government has already promised to beef up developing blockchain technology as part of its effort to prepare for the Fourth Industrial Revolution.
It remains to be seen whether the authorities will succeed in checking the runaway bitcoin speculation, while promoting the sound utilization of cybercurrencies.