After waving the regulatory flag for quite some time, South Korean officials have finally brought about a stringent set of rules which is expected to add to the gyrating price curve of Bitcoin in days to come. Bitcoin suffered a staggering 11% fall down the price ladder today, following the clampdown of cryptocurrency which is going to become a hard-hitting reality in South Korea. It shall target money laundering activities and anonymous trading of the same. Accounting for 20% of the global bitcoin transactions, South Korea the world’s third-largest crypto market had slowly evolved as the melting pot of digital currency trading.
To begin with, the regulation shall impose a ban on the opening of anonymous accounts. The new legislation shall also allow regulators to shut down virtual currency exchanges whenever they deem fit for boosting transparency in operations. Hong Nam-ki, the South Korean minister for government policy co-ordination stated that, “Officials share the view that virtual currency trading is overheating irrationally … and we can no longer overlook this abnormal speculative situation.”
A statement issued by the government in this regard pointed out that, “Cryptocurrency speculation has been irrationally overheated in Korea. We cannot leave the abnormal situation of speculation any longer.”
The regulation has also added that currently operational anonymous accounts shall be closed in the coming month. However, no explanation in regards to the future path of action was provided by the same. With financial fraud and money laundering activities becoming a growing concern following the advent of crypto medium of transactions, this regulation shall focus on these problem areas and quarantine the crypto radar from all malpractices. “We will … resolutely respond to such crimes by slapping maximum sentences possible on offenders,” stated the regulatory announcement while promising to “leave all policy options open, including closure of a cryptocurrency exchange when deemed necessary.”
According to Yonhap, a local news agency, the head of South Korea’s financial regulation agency revealed earlier on Thursday that the “bubble in bitcoin will burst later.” But everyone didn’t seem to be perturbed by this news.
BitSpread CEO Cedric Jeanson revealed to CNBC’s “Squawk Box” on Thursday that he is pretty optimistic about this move which was “normal” and “quite positive” for regulators to bring upon. “The regulator is saying to exchanges to have proper cyber security and proper know-your-client processes in place. With the market overheating in Korea, it is quite natural that the regulator thinks, ‘let’s make sure this is done properly’,” he added.
Seoul had banned all financial firms from dealing in virtual currencies just a fortnight back. The recent announcement from the South Korean periphery generated shockwaves pulling down the price of Bitcoin to $13700 from its previous high of $15300. Similar footsteps are expected to be followed by the regulatory bodies of China, Russia and Israel to taper down the growing popularity of these virtual tokens which house the extreme potential to incapacitate banks and financial institutions in days to come. 2017 had been a highly eventful year for bitcoin with its price reaching record heights of $20000 earlier this month reporting a 25 times hike since the start of this fiscal. However, Christmas did not delight the crypto holders as its price dropped by 30% in just one day of the past week finally stabilising at $16000 on Wednesday. The demand for cryptocurrencies had experienced a meteoric rise in South Korea causing it to be traded at a 20% premium price compared to US exchanges. This has made it increasingly difficult to engage in arbitrage amongst markets.
Koreans usually opt for their local bitcoin exchanges in comparison to the US based ones as in the latter case they need to open a bank account in US for engaging in crypto dealings which surely is a highly cumbersome affair. South Korean officials had revealed earlier this month that they are trying to cool down the demand for cryptos amongst the technology-enthralled population of the country by bringing upon capital gains taxation on the same. Initial coin offerings (ICO) had been banned in South Korea in September. The financial watchdog of the country had also banned bitcoin futures trading.
The notorious regime of North Korean leader Kim Jong-un was suspected as the main culprit behind the hacking of two South Korean crypto exchanges this year. As per South Korean reports, an exchange called YouBit lost about 4000 Bitcoins in April following the heist of hackers. The exchange had to file for bankruptcy after it got hacked twice in a row on December 19. Thieves secured a hefty booty of $70 million worth Bitcoins after breaking into the virtual vault of NiceHash, another Seoul-based exchange few days back.
Bithumb is the largest South Korean crypto exchange which account for 70% of the cryptocurrency transacted in the country. Such wallets and exchanges have become the prime target of hackers who are trying to benefit from the heightened price of bitcoin by illegally acquiring the same.
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Tarunima Ghosh Laha is a Finance Post Grad from St. Xaviers who believes Finance is more than just Balance Sheets and Ledger creation. This filmy bookworm who believes she was a sloth in past life also nourishes a penchant of owning a private zoo someday. Equipped with a laptop and online Lexicon she is all set to give finance a glamorous makeover in the form of exciting writeups with bang on info and flashy new words.
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