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By Lee Min-hyung
Some government officials are issuing a series of warnings against what they call cryptocurrency "speculation" to quell an escalating virtual currency frenzy here.
But the "anti-crypto" approach keeps adding to the volatility of the market, driving more and more young people to get addicted to cryptocurrency investments under the strong belief that this is the only way for them to get rich quick. They believe it will be too late for them to do so if the financial overseers take concrete actions to regulate virtual asset transactions.
The authorities are urged to think twice about why those young people are so attracted to the risky investment before threatening to "shut down" all cryptocurrency exchanges here, stigmatizing virtual assets as "digital forms of gambling."
From that standpoint, financial authorities should consider recent polls showing that Koreans increasingly support capital gains taxation of cryptocurrencies. Rather than applying measures to chill investor sentiment on crypto assets, the authorities are advised to assess why young investors are zealously taking to cryptocurrencies.
The government's rather hawkish approach to "digital assets" reminds this reporter of the years-long housing bubble. Seoul's apartment and real estate prices have soared over the past few years, specifically every time the authorities introduced tough regulatory policies.
The purpose of the drive was understandable, but only ended up spiking housing prices to an unprecedented level. It is no exaggeration to say that the fear has been the root cause behind the asset market bubble.
For example, major cryptocurrency prices ― such as bitcoin ― plunged after Financial Services Commission (FSC) Chairman Eun Sung-soo issued his strongest-ever warning against the frenzy last month. But the price of bitcoin has since bounced back and is on track to reach a previous high.
The government and financial watchdogs have since remained mum over future policies on cryptocurrencies. But they need to change their viewpoint this time, and come up with ways for co-prosperity with digital assets.
Most developed countries are also taking similar cautious approaches regarding the rapid rise of virtual assets, but their regulatory stance is not as one-sided as that of Korea. Coinbase, the largest cryptocurrency exchange in the United States, went public recently on the Nasdaq.
But exchanges here don't want to take the risk of going public on the local securities market over concerns about possibly ensuing political pressure from the authorities.
Now is time for the government to taking rather rationalized steps, and announce a balanced policy stance towards the burgeoning virtual asset market.
