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Gov't vows to crack down on virtual money-related illegal transactions
By Anna J. Park
The government said Monday that it will crack down on any illegal transactions involving cryptocurrencies, such as money laundering and fraud, by strengthening its surveillance of digital assets from this month until June.
The move comes as a cryptocurrency craze has fueled speculation here, with retail investors scrambling for virtual money, which has greatly outperformed stock markets over the past few months, amidst the ongoing COVID-19 pandemic.
According to the Office for Government Policy Coordination (OPC), Monday, related ministries and agencies, including the finance ministry, the Financial Services Commission (FSC), police and the Fair Trade Commission (FTC), held a vice-ministerial meeting Friday as part of the pan-governmental surveillance initiative.
The FSC said it will intensify its monitoring of cryptocurrency transfers, while the Korea Financial Intelligence Unit (KoFIU) will analyze all suspicious transactions and report them to the tax agency or police.
The latter will carry out a crackdown on digital coin scams, account hacking and financial crimes involving digital assets.
The FTC will examine local cryptocurrency businesses' terms and conditions of use, and order the rectification of any irregularities. The Korea Communications Commission (KCC), meanwhile, will prevent any illegal online distribution of sales schemes, and disinformation regarding cryptocurrencies.
“As cryptocurrency trading is more of a speculative deal rather than an investment, people need to judge them cautiously with the utmost responsibility,” said OPC Minister Koo Yun-cheol, calling for extra caution on the part of investors, as there exist various illegal scams surrounding digital coin investments.
Vowing to closely monitor the local cryptocurrency market, the government also stressed that it will continue to work on methods to collect taxes from such investments starting next January.
Frenzy in the local cryptocurrency market
The decision to strengthen government control over cryptocurrencies comes as the domestic market has recently showed signs of overheating.
This is not only limited to Korea, but has become a global phenomenon over the past year, due to excessive liquidity flowing into the market because of central banks' measures to deal with the coronavirus pandemic.
During the past year, the price of a Bitcoin has soared 789 percent from $7,130 last April to $56,274 as of 2:50 p.m. Monday (KST).
Meanwhile, the domestic market has particularly shown heated interest in the digital asset. The so-called “kimchi premium” ― referring to the tendency for cryptocurrencies to be traded at a higher price on Korean coin exchanges ― has strongly persisted during the past months, standing at between 10 percent and 30 percent on average.
When the price of a bitcoin here fell by 2.6 percent over a 24-hour period, as of 2:50 p.m. Monday (KST), it traded at around 73,635,000 won ($65,810), showing a kimchi premium of 16.9 percent.
Despite the government's attempt to intensify regulations on the market, the current frenzy here over digital coins is unlikely to abate any time soon. Mostly people in their 20s and 30s, who feel that they cannot catch up with skyrocketing real estate and other assets prices, are raving about cryptocurrency trading, which they see as a last resort to increase their wealth. They believe stock investments as too archaic and slow compared to trading digital currencies.
“Almost everyone I know is trading cryptocurrencies,” a digital coin investor in his late 20s who wished to remain anonymous told The Korea Times. “Ultimately, I hope to buy a house in Seoul someday. But stocks move too slowly to help my seed money grow quickly. Coins could plunge at any moment, but their value could also double in just a few hours,” he said, adding that he had made a quite lot of money from digital coin trading, while his stock investments remained a losing proposition.
The government's decision to reintroduce short-selling from early next month is also attributed to the further avoidance of stocks, and more liquidity flowing into the digital coin market.
“Short-selling's role is to reduce bubbles in stock prices. That's a positive effect of short-selling and it's probably better for the country's stock market to have this system in place. But as an investor seeking for maximum short-term gains, this makes me to shun the stock market further,” another digital coin trader pointed out as his reason to stay in the cryptocurrency market.