South Korea to Create Cryptocurrency Regulations in Line with G20 Ideals
South Korea’s financial watchdogs will ease regulations on cryptocurrency and create optimal policies to support the burgeoning sector. The Korea Times revealed on July 6, 2018, that the country is following G20 demands to establish “unified regulations” for the digital asset industry.
Cryptocurrency Guidelines Revised
The Financial Supervisory Service (FSS) and the Financial Services Commission (FSC), the two regulators who oversee financial policies in South Korea, have additionally revised their guidelines relating to cryptocurrency exchanges.
Officials confirmed the government is not opposed to cryptocurrencies, yet maintained a stringent stance on applying strengthened policies to curb money laundering and illegal activities using cryptocurrencies. The publication quoted a government official:
“Establishing unified rules is a complicated issue given the broader range of assessments between government agencies. This is why the country needs close international cooperation as it is still in the early stages of fine-tuning guidelines.”
Difficult Market to Administer
Workers of the FSC and FSS noted the government remains pessimistic on token issuers and ICOs, and while the underlying concept of cryptocurrencies is well understood, it is “difficult to value them as financial assets.” Instead, the administration is pushing to classify the asset class under “non-financial products” due to their speculation-driven pricing nature.
The burgeoning cryptocurrency sector has caught the attention of authorities worldwide, with most countries either introducing limited regulations or outright banning the asset class. While smaller nations like Malta and Bermuda have released legislation for the sector, no firm regulation has yet been introduced by major economies outside of the handful of outright bans.
The lack of regulations, in turn, exposes retail investors to “whales,” or people with vast cryptocurrency holdings, who can create false order books and manipulate exchanges.
In this regard, a Korean trade ministry official noted that governments could not radically introduce regulations for the sector. Instead, they must “gradually shift” their attitudes.
South Korean Banks Reveal Distrust of Digital Assets
While regulators pushed for guidelines in line with global authorities, South Korean banks expressed their views on the sector. On July 6, 2018, Yonhap News reported South Korean banks maintained their distance from the asset class despite the highly-profitable opportunities it seemingly provides.
Cryptocurrency exchanges store over 2 trillion won ($1.79 billion) in South Korean banks, yet the figure is a drop in the bucket compared to traditional finance holdings, worth at 26 trillion won.
The report cited figures for 2017, and these values may be higher after several cryptocurrency exchanges announced expansion plans and posted billion dollars in profits in 2018. However, this is not enough to lure banks to the asset class:
“The amount of crypto-asset investment is not really big, compared with other equity markets, and local financial institutions’ exposure to possible risks of digital assets is insignificant. Against this backdrop, we expect crypto-assets to have a limited impact on the South Korean financial market.”