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Whether to close virtual money exchanges to be decided later
By Kim Yoo-chul
The government reaffirmed Monday that it will decide whether to shut down cryptocurrency exchanges after consultations with related ministries and agencies.
It warned that investors themselves will have to take full responsibility for losses from their investments in virtual coins. The administration made it clear that it will restrict the overheating cryptocurrency market, although will decide on how to regulate it later.
It said it will push for real-name based trading of virtual currencies and crack down on illegal transactions involving them.
Financial Services Commission Chairman Choi Jong-ku said the government will regulate the cryptocurrency market to fight speculative investment.
"Even if the government is criticized (by the public), it must do what it has to do. The government's regulation is to prevent greater losses individual investors could sustain from speculative investment in virtual currencies."
Justice Minister Park Sang-ki's remarks that his ministry was preparing a bill to close cryptocurrency exchanges sparked uproar among investors last week, and drew public criticism for causing confusion about government policy.
"The earlier statement by Justice Minster Park that the government will shut down cryptocurrency exchanges was one of the ideas suggested by the ministry to curb the ongoing craze. Government agencies will decide on the matter after thoroughly discussing the issue," Chung Ki-joon, head of the economic bureau at the Office for Government Policy Coordination, said at a press briefing in the government complex in downtown Seoul.
Chung said the government will ban trading of virtual currencies under aliases.
"The government will push local banks to implement identification-checking procedures on crypto-trading as planned," he said. "The financial authorities will definitely team up with the prosecutors' office and the local police to crack down on any illegal activities including money laundering and attempts aimed at manipulating cryptocurrency markets."
He said cryptocurrencies are not legally-guaranteed currencies, meaning investors must be aware of the high risks involved in investing in virtual coins.
"On top of accepted factors such as supply and demand, there are other crypto-related factors that affect the price of a virtual currency. They are very volatile depending on changes in restrictive measures by governments and speculative trading. Each individual investor should be responsible for any losses," Chung said.
The government's latest confusing stance has suggested that people and organizations within the government may not see eye-to-eye on how to deal with the overheating cryptocurrency market here. The case of China shows that such bans can't do much to crack down on the trading, as Chinese investors relocated their crypto-assets to overseas exchanges using apps such as Telegram to make "over-the-counter" trades.
But the senior government official declined to comment on whether the shift is in accordance with its political gesture to appease anger of those in their 20s and 30s ahead of upcoming local electronics. Investing in bitcoin, the most-popular crypto product, and others is hugely popular among young people in Korea.
A few hours after the announcement, the Financial Supervisory Service (FSS) said it had created a taskforce to monitor the progress of banks in applying an identification-checking system for virtual accounts, and to check whether financial institutions were complying with the government's initiatives to block money laundering and other illegal activities.
"The FSS will closely study cases of other governments regulating crypto-assets and exchanges. But in the meantime, we will talk with companies on how to facilitate blockchain-based technologies in the finance industry by running an advisory pooling system," said an FSS spokesman.
Cryptocurrency operators welcomed the shift in policy and pledged to collaborate with the government to advance crypto-trading systems.
"We welcome the government's decision to scrap its earlier plan to ban all cryptocurrencies. The decision was ambitious. The main problem is that local banks are passive in introducing identification-checking systems," said Kim Jin-hwa, co-chair of the Blockchain Industry Association. He added that the association will soon create a "voluntary regulation committee" to sync with the government's policy shift.
"It's impressive to see that the government wants to communicate with markets. We will strictly follow a set of guidelines," Bithumb, the largest cryptocurrency exchange operator in Korea, said in a statement.
