Over the past 24 hours, a series of false reports from news publications including Reuters have claimed that the South Korean government is planning on banning or closing down cryptocurrency exchanges.
An initial report from Reuters, which has since been corrected, stated that the South Korean government is expected to close down cryptocurrency exchanges in the local market.
However, the South Korean government has never released such a statement. The official document released by the South Korean government translated by CoinJournal read:
- The government will continue to evaluate the cryptocurrency trading trend and impose practical regulations in a timely manner.
- The Ministry of Justice has drafted a special cryptocurrency law and is considering the possibility of closing down exchanges involved in suspicious or illicit activities such as money laundering.
- The government will strictly handle speculative movements in the local cryptocurrency market but will facilitate the growth of cryptocurrency and blockchain technologies.
The South Korean government has already imposed one policy which prevents underaged and foreign investors from trading cryptocurrencies on local exchanges in order to bring the speculative mania from the South Korean market under control.
In the past, South Korean Prime Minister Lee Nak-yeon and Deputy Prime Minister Yoo Il-ho publicly expressed their concerns in regard to “bitcoin mania” that has led underaged investors, including middle, high school students to invest in bitcoin. Prime Minister Nak-Yeon specifically emphasized that students have begun to allocate most of their time, resources, and intellectual capacity in day-trading cryptocurrencies, describing it as a worrisome trend.
The South Korean government also prohibited foreigners from trading bitcoin and other cryptocurrencies in the local market because of its previous crackdown on Chinese traders who brought in massive amounts of bitcoin from China to South Korea with the sole intent of arbitraging and laundering money.
As it had noted in its statement released this week, the South Korean government has acknowledged bitcoin as a legitimate asset class and is moving towards regulating bitcoin as the market continues to grow. It does not intend to interfere in the growth of its local cryptocurrency market. Rather, the South Korean government is aiming to better regulate the market.
Over the past 12 months, several large-scale cryptocurrency-related Ponzi schemes were discovered throughout the country. One of the largest bitcoin-related Ponzi schemes was a $200 million operation, which took the funds from tens of thousands of investors from middle-aged to old investors.
Local exchanges stated that they welcome regulations from the South Korean government because it will prevent any more funds from being allocated to nefarious schemes, instead it will be redirected to regulated platforms.
In the first week of December, a spokesperson of a cryptocurrency task force formed by the South Korean Ministry of Strategy and Finance, Financial Services Commission, Ministry of Justice, Fair Trade Commission, and Financial Supervisory Commission stated that the South Korean government will follow the regulatory roadmap set by leading markets like the US and Japan.
“The South Korean government has no other choice but to follow the regulatory frameworks and trends established by other leading governments. While there certainly exists a negative reputation attached to the cryptocurrencies, the government’s stance is to allow what has to be allowed, for the benefit of the South Korean market.”
Given the optimistic approach of the South Korean government to better regulate the market and facilitate demand for cryptocurrencies, local exchanges and investors remain highly optimistic in regards to the long-term growth trend of bitcoin.