Emergency Meeting in South Korea to Combat “Bitcoin Zombies”
The government of South Korea, one of the world’s centres of bitcoin trading, has held an emergency meeting to discuss cryptocurrency trading and regulation. New regulations will tighten customer protection and restrict exchange access. They also pave the way for taxing trading profits.
South Korean authorities are taking cryptocurrency trading seriously, holding an emergency meeting in response to fears of the potentially destabilising effects of price volatility in crypto markets. This volatility has given rise to “bitcoin zombies”, inexperienced traders who care about nothing except the bitcoin price.
The regulatory response focuses mainly on the country’s cryptocurrency exchanges. Account applications will have to be verified and minors and foreigners prevented from opening accounts. Exchanges will also have to tighten up storage of encryption keys and disclose bids and offers. The ban on financial institutions holding or trading cryptocurrencies will remain in place.
Though no new tax arrangements have been announced the option to impose capital gains taxes on trading profits is being “discussed in-depth”.
The news follows evidence of growing official discomfort with cryptocurrencies in the Asia-Pacific region. Philip Lowe, governor of the Australian central bank, recently described bitcoin trading as “speculative mania” while Grant Spencer, his New Zealand equivalent, called it a “classic case” of a bubble.
South Korean authorities are cool on cryptocurrencies. Prime minister Lee Nak-yeon had already voiced fears about the corrupting influence of bitcoin on the nation’s youth warning that it could lead to “serious distortion or social pathological phenomena”. On Monday Choi Jong-ku, the head regulator in South Korea, told the press that crypto exchanges provide, “zero utility to the national economy”.
Some in the market have welcomed increased regulatory attention as a way of reassuring the mainstream, particularly institutional investors. Thomas Glucksmann of Hong Kong crypto-exchange Gatecoin said that,
licensing brings certainty, which encourages already regulated entities … to get involved in addition to skeptical retail investors.”