South Korea to Share Its Decision on ICO Legality in November
The South Korean government reportedly will announce the decision on Initial Coin Offerings (ICOs) in November, determining its official position whether it will grant ICOs again in the country. According to Business Korea, the National Assembly of the Republic of Korea, which consists of committees and political parties started a special session discussing blockchain, cryptocurrency industry, a guideline on ICOs, and Jeju Island as a blockchain and cryptocurrencies haven on 20 August 2018[1].
South Korea applied the country-wide ban on ICOs in September 2017 because the lawmakers saw the practice of ICOs by raising funds via the issuance of cryptocurrency tokens was uncertain. However, some companies still attempt to conduct ICOs; led to the polls handled by South Korea’s finance oversee, Financial Services Commission (FSC). The results will be expected to be published in October 2018[2].
According to the chief of the office for Government Policy Coordination Hong Nam-ki, the South Korean government will use the conclusion to ‘form the position of the government towards the ICOs’. “We are going to form the position of the government in November based on the results of the investigation at the end of October,” Hong stated[3].
The Regulation of Cryptocurrency in South Korea
The South Korean government is known for accepting cryptocurrency with several prerequisites. Currently in South Korea, it is not possible for minors and non-resident foreigners to trade on exchanges; meanwhile, financial institutions are prohibited to hold or invest in cryptocurrencies. Adult South Koreans can only trade on registered and qualified exchanges using real name accounts at a bank where the exchange also has an account; their identities should be verified by both the bank and the exchange. Banks and exchanges are responsible for enforcing other anti-money-laundering provisions as well[4]. Other significant crypto-related regulations that have been applied by the South Korean government are[5]:
1. Financial institutions are not able to hold or invest in cryptocurrencies
2. The government considers cryptocurrencies to be neither money nor currency nor financial product
3. ICOs are banned
4. Bitcoin derivatives trading is not permitted
Korean Regulatory Timeline 2018
11/01/2018 — A bill was being prepared to ban all cryptocurrency trading in the country, caused both bitcoin and ethereum prices dropped 12% and 7.6%[6].
16/01/2018 — A petition against the strict regulations of cryptocurrency in South Korea obtained more than 212,700 signatures, reached the minimum 200,000 required signatures to compel a response from the government[7].
18/01/2018 — South Korean government considered to shut down all virtual currency exchanges, especially the ones that had violated the law[8].
14/02/2018 — Hong Nam-ki, the chief of the office for Government Policy Coordination, released a statement in response of the last month’s petition, saying that “The government’s basic rule is to prevent any illegal acts or uncertainties regarding cryptocurrency trade, while eagerly nurturing blockchain technology… But, the government is still divided with many opinions ranging from an outright ban on cryptocurrency trading to bringing the institutions that handle the currency into the system[9].”
10/05/2018 — The new head of Korea’s Financial Supervisory Authority (FSS) Yoon Suk-heun considered cryptocurrency as a financial asset[10].
11/05/2018 — South Korea’s cryptocurrency exchange Upbit was under investigation[11].
14/05/2018 — Three senior executives and employees of HTS Coin were arrested for allegedly withdrawing funds from their accounts by transferring customer funds from their bank accounts to other accounts[12].
28/05/2018 — Bithumb banned trading in 11 Non-Cooperative Countries and Territories (NCCT) as an implementation of the recommendations given by the South Korean government and the Korea Blockchain Association[13].
29/05/2018 — South Korea’s National Assembly proposed to lift ICO ban[14].
30/05/2018 — South Korean Grand Court recognized bitcoin as a valuable asset and confiscated bitcoin resulting from illegal activities[15].
13/08/2018 — The governor of Jeju Island, Won Hee-ryong, proposed a plan to make Jeju Island as a blockchain and cryptocurrency haven where ICOs would be allowed[16].
27/08/2018 — Joongang Daily reported that the Korean province of Gyeongsangbuk-do issued its own cryptocurrency called Gyeongbuk Coin. It would replace its existing local payment system[17].
10/2018 — The result of the surveys done by FSC will be announced. It will be the basis of decision making for ICOs legality in South Korea[18].
11/2018 — The South Korean government will publish its official position on ICOs legality[19].
Future — The South Korean government expressed its interest in supporting blockchain development with a budget of 34 billion won or equal with $30 million in the coming years[20].
A Hotbed for Cryptocurrency Trading
According to Coinhills, South Korea is the world’s third biggest market in bitcoin trading, after Japan and the U.S.
Figure 1: Most Traded National Currencies for Bitcoin
Data Source: Coinhills
Besides that, South Korea hold 33% of Ether’s market share, making it the largest exchange market for Ether in 2017. The country is also home to Bithumb and Coinone, two of the top 15 global digital-currency exchanges[21]; showing how powerful South Korea in the cryptocurrency world. Despite the ban, until now South Korea is still one of the most dominant cryptocurrency players in Asia and even in the world. Cryptocurrency analyst, investor, and influencer Joseph Young also stated that the drop in bitcoin price on October 11, 2018 was strongly influenced by South Korea. He commented, “It is plausible that investors and traders in Asia have contributed quite largely to the drop in the price of Bitcoin today. The volume of crypto exchanges in South Korea and Japan (Bithumb, Bitflyer) is huge.”
South Korea’s influence on cryptocurrency can also be seen on the sentiments towards the keyword ‘South Korea cryptocurrency’ which are mostly dominated by the colour green, indicating the public’s positive view on the future of cryptocurrency in South Korea.
Figure 2: Sentiment Towards ‘South Korea cryptocurrency’ Keyword
Data Source: Sentiment Viz
[1] Young-sil, Y. 2018. ICOs, Blockchain High on Agenda of Korea’s National Assembly Extraordinary Session. [http://www.businesskorea.co.kr/news/articleView.html?idxno=24403]. Accessed October 14, 2018.
[2] Berman, A. 2018. South Korea to Announce Its ICO Stance in November, Top Official Says. [https://cointelegraph.com/news/south-korea-to-announce-its-ico-stance-in-november-top-official-says]. Accessed October 14, 2018.
[3] Zhao, W. 2018. South Korea to Decide on ICO Legality in November, Official Says. [https://www.coindesk.com/south-korea-to-decide-on-ico-permission-in-november-official-says/]. Accessed October 14, 2018.
[4] Library of Congress. 2018. Regulation of Cryptocurrency Around the World (PDF). The Law Library of Congress, Global Legal Research Center. Accessed October 14, 2018.
[5] Tjing, L. 2018. Regulating Cryptocurrencies (PDF). BBH Foreign Exchange. Accessed October 14, 2018.
[6] Havilland, P. 2018. What You Need to Know About Cryptocurrency in South Korea. [https://www.10mag.com/what-you-need-to-know-about-cryptocurrency-in-south-korea/]. Accessed 14 October, 2018.
[7] Partz, H. 2018. South Korean Petition Against Crypto Regulation Gets 200K Signatures, Government Must Respond. [https://cointelegraph.com/news/south-korean-petition-against-crypto-regulation-gets-200k-signatures-government-must-respond]. Accessed 14 October, 2018.
[8] Havilland. Loc. Cit.
[9] Suberg, W. 2018. S. Korea Responds To Public Petition: No Crypto Trading Ban, But Gov’t ‘Still Divided’. [https://cointelegraph.com/news/s-korea-responds-to-public-petition-no-crypto-trading-ban-but-govt-still-divided]. Accessed 14 October, 2018.
[10] Joyce from Global Coin Research. 2018. Cryptocurrency Regulations and Government Announcements — Timeline by Country: China, Korea, Japan, Singapore, Thailand, India. [https://medium.com/@globalcoinrsrch/cryptocurrency-regulations-and-government-announcements-timeline-by-country-china-korea-japan-a3bb43debdac]. Accessed 15 October, 2018.
[11] Ibid.
[12] Ibid.
[13] Ibid.
[14] Ibid.
[15] Ibid.
[16] Das, S. 2018. Jeju Island Aims to Become an ICO-Friendly Blockchain Hub Inspite of South Korea Ban. [https://www.ccn.com/jeju-island-aims-to-become-an-ico-friendly-blockchain-hub-inspite-of-south-korea-ban/]. Accessed 15 October, 2018.
[17] Newar, B. 2018. Korean Province to Issue ‘Gyeongbuk Coin’. [https://thenews.asia/en/2018/08/27/korean-province-gyeongsangbuk-do-to-issue-gyeongbuk-coin/]. Accessed 15 October, 2018.
[18] Zhao. Loc. Cit.
[19] Ibid.
[20] Ibid.
[21] Kim, Y. 2017. Behind South Korea’s Cryptocurrency Boom. [https://www.technologyreview.com/s/609561/behind-south-koreas-cryptocurrency-boom/]. Accessed October 15, 2018.
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