South Korea Prepares Legislation to Regulate Cryptocurrency Market
South Korea has announced plans to adopt changes in its existing laws in order to create a more regulated space for cryptocurrency trade to occur. These changes are part of an effort to protect South Koreans from any possible risks arising from a lax regulatory framework.
The bills are being prepared by Democratic Party of Korea representative, Park Yong-jin. Park is aiming to introduce three bills to alter an equal number of acts currently in place. He expects to ready and table the bills by July 2017.
Speaking to the Korea Herald, Park explained his motivations for creating the bills stating that “there is a need to address the void of a state-led protection that guarantees digital currency’s value, digital currency’s non-exchangeability to other existing currencies as well as the possibility of wreaking havoc on national economy from digital currency bubble burst.”
According to data from CryptoCompare, South Korea’s local currency showcased the fourth-largest bitcoin exchange trading volume from April 1 to June 10. However, these transactions are largely unregulated by the government which, according to Park, is a risk that needs to be mitigated.
In addition Park, as well as the Financial Supervisory Service, is of the opinion that cryptocurrency trading platforms currently operate outside the law stating: “[…] Virtual currency trading platforms in Korea, including Bithumb, Korbit and Coinone, taking up 75.7 percent, 17.6 percent and 6.7 percent in the market respectively, have no legal grounds for their establishment.”
The first bill seeks to alter the Electronic Financial Transactions Act. The changes would require all business entities, as well as traders and brokers participating in the cryptocurrency market to acquire legal authorisation from the South Korean Financial Services Commission. In order to get the regulatory approval, firms would have to have at least 500 million won ($436,300) as capital as well as possess adequate data processing facilities.
The other two bills are set to revise both the income tax and corporate tax acts. Park hopes these revisions will aid financial authorities to combat tax evasion relating to transactions in the cryptocurrency market.
The move has been positively received by South Korea’s business community. Kim Kyung-hwan, head attorney of leading South Korean law firm Minwho said, “User protection, tax evasion, and money laundering have long been issues in terms of digital currency transaction. Digital currency traders have often found themselves in trouble because they are out of a legal boundary.” He believes that the bills would lead to “removed uncertainties” as well as “boosted transparency” in the cryptocurrency market.
South Korea’s move is reminiscent of Japan’s legalisation of bitcoin which signals a growing willingness by governments and the private sector to work with digital currencies and can be seen a big positive for bitcoin given South Korea’s increasingly important role as a bitcoin trading hub.