While Japan respects digital currencies as legal currency and the IRS considers them property, South Korea has taken a different approach. Lee Joo-yeol, South Korean central bank governor, recently proclaimed that Bitcoin and virtual currencies would be treated as commodities. Regulation will take time to fully formulate and is not expected any time soon, according to the governor.
“It is not a situation for the Bank of Korea to take action at present.”
He continued, saying that South Korea has considered research conducted on virtual currencies around the world to ultimately settle on this viewpoint. It is unlikely that this stance will change, as it is essentially a regurgitation of the opinion of the superior authority, the Bank of International Settlements.
South Korea – a Brief History
South Korea has taken a proactive role in regulating virtual currencies. Last year it unleashed a digital currency task force to consider the implications of legalizing them and licensing exchanges. The committee was unable to reach consensus, however, and the project came to a standstill. As a result, Korean regulators have taken a cautious approach, making statements to guide discussion toward a later verdict.
Following China’s ICO ban, Korean markets saw an uptick in trading volume. Kakao, SK’s largest messaging app, laid plans to launch its own exchange and planned to support over 100 cryptocurrencies. Korea was having their moment in the spotlight, and many believed it would become a leading authority in the space.
Instead, on September 29th, South Korea banned ICOs. Proliferation of coin offerings had become a threat in the eyes of regulators, and they sought to protect citizens from fraud. Kim Yong-bum, vice chairman of the Financial Services Commission, said the following:
“We are worried about adverse effects such as increased risk of fraud. The ICO will be prohibited in all forms. ”
Since then, the price of Ethereum has been suppressed. South Korea had carried a large portion of its trade volume. It is still trading well below its August 31st high, while Bitcoin has far surpassed its same day high.
Hopefully Korea can soon find a compromise to harness the obvious economic advantages the crypto ecosystem has brought to the country, while also protecting investors and the fragility of the ecosystem.
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