In an unprecedented move, South Korean regulators are reportedly preparing to strengthen the regulation and monitoring of cryptocurrencies like Bitcoin and Ethereum.
South Korea’s newly appointed “Digital Currency Task Force” reportedly will consist of the country’s central bank, various financial regulators and South Korean based digital currency entities. The task force aims to amend the “Electronic Financial Transaction Act” which intends to closely regulate cryptocurrencies.
The task force has discussed at this point in preliminary meetings increased regulatory oversight into trading, business practices, and “uncouth” practices that have run rampant throughout the unregulated industry. Much like the SEC in the United States, this can be seen as a cryptocurrency extension of that particular organization, something that has been discussed in several financial and political circles.
According to several South Korean media outlets (1,2), the proposal was put forth this week by Park Yong-Jin, a representative from the Democratic Party who has been at the center of recent regulatory deliberations.
These amendments will seek to define the role of cryptocurrency businesses and ultimately to classify different parties as “digital” currency traders, brokers, issuers and managers, effectively putting an entirely new financial enterprise to work within South Korea.
Other amendments will be to require businesses to hold deposits or provide insurance to hedge against potential cyber crime activity. This amendment aims to apply a 500 million won ($4500 USD) in capital reserve threshold for any business that operates cryptocurrency trading services prior to seeking approval from the authority.
Provisions for preventing market manipulation and money laundering using digital currencies are also included in these changes.
Park Yong-Jin is seeking a more regulated environment amongst the recent price surge of digital currencies like Bitcoin, Ethereum and even Litecoin to name a few. This proposal follows a recent panel (3) hosted by Park at a public hearing to argue for regulations regarding cryptocurrencies.
The next step in this legislative action will involve the bill to be presented to the regular session of the National Assembly in September, at which point it needs the full support of the country’s Financial Services Commission.
Whatever the result of the decision of the National Assembly in September, we can’t help but be immediately reminded of what is happening in China after legislation was passed banning ICOs. While the bills could have certainly made a positive impact on crypto-currency, it had an opposite effect. The bills passed essentially made digital currency illegal and the price plummeted.
South Korea will have to tread lightly if they wish to be part of a future that embraces this technology. Crypto-currency financially empowers individuals like you and me, and that, unfortunately, doesn’t always support the ideals of everyone.
3. Recent Panel