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| Financial Services Commission Chairman Koh Seung-beom. Korea Times file |
Legislation needed for clear definition of 'virtual asset,' scope of industry
By Lee Kyung-min
The recent launch of bitcoin futures exchange-traded funds (ETF) in the U.S. is a stark reminder of how far Korea is lagging behind its global peers in discussions over the development of a digital financial market, bogged down in large part by nervous policymakers, regulators and legislators questioning the validity of digital currency.
The absurdity of the unified stance of the Financial Services Commission (FSC) and the Ministry of Economy and Finance is highlighted further by their unwavering move to tax gains from crypto trading. The issue barely occupies the mind of the Bank of Korea, which is treating it as no more than a financial stability risk factor.
Still lacking, all the while, is a clear definition of cryptocurrencies, including whether they should be recognized financial assets or whether they are a valid investment vehicle at all ― let alone the scope of the industry and its responsibilities.
A dozen bills seeking to clarify these issues are collecting dust awaiting passage by the National Assembly. But no immediate breakthrough is expected, since the much-politicized debate will become a major campaign issue with young people ― mostly in their 20s and 30s who have invested heavily in digital coins ― ahead of the presidential election next year.
With uncertainties ranging from political, regulatory and administrative factors weighing in, it is too early to call for an immediate launch of a bitcoin-related financial investment vehicle similar to ProShares Bitcoin Strategy ETF (BITO), the first bitcoin ETF in the U.S.
However, the regulatory discourse should move forward and beyond wariness over a potential backlash and promptly lay the institutional groundwork to make advanced financial products available.
An increasing number of brokerages are issuing reports on the need and potential growth of bitcoin ETFs, which they say would contribute significantly to the advancement and innovation of the financial market, a key initiative of the FSC.
But innovation led by the private sector can only go so far, if every effort undertaken by market participants is shot down by authorities in the form of heavy regulations and the same answer: "The matter is under consideration. We are monitoring market developments."
One silver lining found amid the deadlocked discussion is a notable change in the stance of FSC Chairman Koh Seung-beom, as indicated by his remarks two weeks earlier.
"We will participate in the parliamentary discussion concerning the crypto asset legislation," he said during a National Assembly audit of the financial regulator on Oct. 6.
This comment shows a clear shift since his inauguration, Aug. 31, when he reiterated that he would not "lead the institutional framework" for the crypto industry, a comment that repeated the regulatory institution's previous stance of "upholding global standards."
Korea is known around the world as an IT leader and a hotbed of technological innovations. Whether and how fast the country resolves this slew of sticking points will determine if it truly deserves that global reputation.
