The South Korean government seems to have realized the potential of blockchain and cryptocurrency – like Korean citizens, they have contributed a large share of the global cryptocurrency market; it was reported that in July last year, South Korea handled More than 14% of Bitcoin transactions worldwide.
Over the years, South Korea’s relationship with the cryptocurrency industry has been volatile. In September 2017, ICOs were completely banned. In January this year, there were rumors that cryptocurrencies would all be banned, although they were eventually rumored.
However, in this Asian country, the situation has improved, and there are rumors that South Korea is seeking to lead the fourth industrial revolution. The South Korean government seems to have realized the potential of blockchain and cryptocurrency – like Korean citizens, they have contributed a large share of the global cryptocurrency market; it was reported that in July last year, South Korea handled More than 14% of Bitcoin transactions worldwide.
However, the shift in government attitudes is accompanied by strict regulation and rulemaking on cryptocurrencies.
They have developed some particularly stringent rules for the encryption field, including: prohibiting anonymous transactions, prohibiting minors and government officials from engaging in transactions, and collecting transaction taxes; at the same time, they have taken active action: recently canceled the ICOs A comprehensive ban, legalizing Bitcoin as a method of remittance….
Latest developments: the classification of exchanges
South Korea’s latest move is that they have reclassified legal entities for cryptocurrency exchanges. The new draft adds a lot of legitimacy to the Korean market in the blockchain. The exchange is now classified as “Private Asset Exchange and Brokerage”.
This redefinition is important because it “recognizes that the crypto exchange is a regulated financial institution” rather than the previous “communication provider” classification.
Of course, the cryptocurrency exchange is regarded as a legal legal entity by South Korea, which is undoubtedly good news for the encryption industry. After receiving the recognition of the government, it will be protected and guaranteed. However, they are also subject to more laws and regulations.
This seems to be a positive step for the average customer of the exchange because they have previously lacked the basis for legal protection in the face of issues including hacking and fraud charges. But looking at the government’s actions in the blockchain area, it’s no surprise that they have developed this latest regulation on the exchange.
Andrew Lim, president of marketing and public relations at South Korea’s blockchain company, told Cointelegraph that this is more of a time issue than a question.
“Reclassifying the blockchain is expected, especially when it comes to the urgent need for exchange regulation. Not long ago, you could use South Korea’s ‘mail order’ for cryptocurrency transactions. There were few regulatory measures at the time. The platform they built on the exchange is also extremely insecure.”
a necessary change
Looking back at the previous situation in Korea, it also gives us a deep understanding of why the Korean encryption industry is moving in the current direction.
Lim went on to explain what happened when the Korean government began to intervene and tried to ensure the safety of the Korean exchange: “Recently, I sent a warning to investors about the risk of leaving crypto assets on the exchange. A few hours later, Bithumb was hacked. Attack! I still remember at a seminar on policy development, the speaker said that if hacked or their data is destroyed, the exchange does not take any responsibility.”
“People have hundreds of millions of won in these exchanges (equivalent to hundreds of thousands of dollars in Korean won), which is absolutely crazy.” This is indeed the wild East – breeding hatred and fraud. It is inevitable that they are classified as legal entities and classified under stricter supervision, and it is unlikely that they will come earlier. ”
South Korea’s move to legalize cryptocurrencies
These include legitimizing bitcoin remittances and allowing fintech companies to process bitcoins worth up to $20,000 for users, which was unprecedented at the time and considered quite forward thinking.
In order to weigh the parties, the regulator has also established relevant rules for the transaction. By allowing remittances, Korean exchanges are now linked to the Financial Services Commission (FSC). They asked the exchange to provide at least $436,000 in deposits, as well as knowledge of customer (KYC) and anti-money laundering (AML) data processing facilities to obtain regulatory approval.
As the Korean government found its position in the cryptocurrency market, it also learned where to implement a tough line and what needs to support innovation to grow.
Like China, ICOs are also completely banned in order to prevent rampant fraud in the industry while prohibiting anonymous transactions.
The major impact of these regulatory policies on the Korean cryptocurrency market has led many to wonder whether a comprehensive ban on cryptocurrencies is in the pipeline. In fact, the rumors were so rampant that 200,000 people petitioned against it in January. This led to the Qingwatai, the seat of the head of the government, having to stand up and refute these rumors.
Building the fourth industrial revolution
Obviously, the attitude of the Korean government towards cryptocurrency has changed a lot. This is not only because they have changed from rejecting it to being keen on it, but because they have decided to launch it in person and support it as an opportunity to help South Korea stand at the forefront of the fourth industrial revolution.
When people saw that the recent ICO ban was lifted, the change in attitude of the Korean government was the most obvious. Hong Kong, the ruling party in South Korea, said that the main objective of this legislation is to help eliminate the uncertainty faced by companies related to blockchains.
The Korea Special Committee, which is responsible for advancing the fourth industrial revolution, also has an understanding of the cryptocurrency regulatory targets of May 29. “We need to set up a working group, including private experts, to increase the transparency of cryptocurrency transactions and establish a healthy trade order. We will also establish a legal basis for cryptocurrency transactions, including ICOs, through the Standing Committee of the National Assembly.
In addition, there are various signs that indicate this change in attitude:
The country’s Ministry of Science and Information and Communication Technology announced a blockchain technology development strategy on June 21; the country’s central bank began exploring the idea of using cryptocurrencies and blockchains in May; telecom operator SK Telecom et al. On April 23, the company announced the launch of asset management services using blockchain technology; Samsung on June 30 released a blockchain logistics platform called Cello 3.0…
Now, the Korean government’s latest draft law on blockchain is focusing on new categories of blockchains, especially exchanges, and they are the next areas to address.
On the surface, exchanges are now considered legitimate entities, which is important because it means that the government recognizes that their ecosystems are legitimate.
But this move is a double-edged sword for the exchange, and the exchange has experienced many difficulties in the process of government regulation of the blockchain and cryptocurrency.
Yin Junyuan, head of EOS Asia’s Korea operations, pointed out to Cointelegraph that the focus of this reclassification seems to be on the exchange and the transactions it generates:
“As far as I know, (new classification) may be announced at the end of the month or early August. The trading of cryptocurrencies and the regulation of exchanges will be a key issue, as most Koreans will encounter Bithumb and when trading, depositing and withdrawing money. Upbit’s question.”
Yin Junyuan continued to explain that the government’s move is clearly beneficial to the day-to-day users of the exchange – because it has encountered difficulties in depositing and withdrawing money – but he also pointed out that the exchange will now be closely monitored.
“(Exchanges) will continue to be monitored by security levels to ensure that everything is just right. For customers, this will be a huge opportunity as it will provide people with more opportunities to invest in encrypted assets. ”
Since the end of last month, various departments of the Korean government have been working hard to draft a final draft of the new blockchain industry classification plan, which is expected to be completed by the end of July. Of course, it is expected that the protection and recognition of these new classifications will benefit the exchanges in the long run, but they will also be subject to stricter regulation.
Comparison with Japan
South Korea’s regulation can be contrasted with Japan, especially after the Japanese Financial Services Authority (FSA) hacked against the February 2, 2014 Mt.Gox and January 26, 2018 Coincheck exchanges.
Like the South Korean government, Japan hopes that the exchange will meet the standards expected by the government and regulators. However, in Japan, these harsh rules triggered a strong rebound – some exchanges decided to close down, and the heads of Bitflyer and Bitbank exited the Japan Virtual Money Trading Association (JVCEA) after receiving these regulatory options.
However, Yin Junyuan does not believe that this rebound will have a great impact on the Korean exchange, he expects this regulation will stimulate the growth of more exchanges.
“I don’t think any exchange will object to it. Once regulatory measures are introduced, I expect the number of exchanges to double or even double by the end of the year.”
Better business prospects
Yin Junyuan also explained that not only exchanges and investors are waiting for supervision, but many cryptocurrency-related companies have some uncertain futures and are uncertain about the regulatory measures the Korean government will take. But now, they have a clear outline.
Many banks are also on the sidelines. Many Korean companies are heading to Singapore and other places for ICOs, so the Korean government is quickly taking action to include these regulations.
Companies with blockchain operations in Korea seem to be happy to see regulatory measures as this will bring a better future for the sector.
Agada Nameri, general manager of iCapital, told Cointelegraph: “This is another step in the process of providing a regulatory framework for the exchange of value in digital assets. Korea is the world’s leading provider of encryption assets. One.”
In addition, Orel’s co-founder Uriel Peled told Cointelegraph: “South Korea may become a ‘blockchain country’.” “If these government initiatives go hand in hand with the blockchain engineers, South Korea Will become the global leader in blockchain.”
The door to supervision has been opened
Every time a regulator enters a new field, it seems that there will be a battle – as Japan and South Korea now see, these new classifications have changed the landscape of the exchange. As encryption services begin to gain more and more regulation, they are faced with the choice of either doing their own better or simply leaving the field.
But fundamentally speaking, it is good. Because there is no control, the cryptocurrency sector has fallen into the “wild west” situation, and now that regulation has been involved, those who want to stay in this field must improve their business and provide reputable services.
The normative and legal transactions have always been to legitimize the blockchain and cryptocurrency industries, laying the foundation for a healthier environment.