South Korea has been leading in Bitcoin fields with close to 20 percent of shares but has recently been in the news trying to regulate Bitcoin and in fact fighting Bitcoin trend. On Thursday, the government said through the Ministry of Justice that it is considering shutting down all cryptocurrency exchanges in the country.
The Thursday comments caused a 25 percent fall in Pareteum stock price which had just doubled. Bitcoin prices on Bithub exchange also fell 13.8 percent from $20,181 to $17,400 after the announcement.
There is no guarantee that the recommendation will pass Congress though. He says the decision seems rather quick.
Yoo Byung-Joon, a business administration professor at Seoul National University, said,
“We don’t need to do that, but they worry about fraud or such. But there’s no guarantee that this shutdown will pass Congress, so we have time. Governments, you know, are risk-averse. But economically, I think it’s not a good decision. There’s no need to hurry”.
The threat of hacking by North Korea as the country tries to use it as an economic weapon due to industrial bans is one apparent reason, but there appear to be others. In April last year, Youbit lost US$35 million in a hack blamed on North Korea operatives.
Shinhan and KB Kookmin have announced they will not be redeeming credit card points for Bitcoin from mid-January. This happened after South Korean officials reportedly banned trading Bitcoin futures and drafted emergency measures to keep out minors, foreigners, and banks from trading the currency. So the other reason could be to protect consumers against volatility and risks of trading Bitcoin and cryptocurrencies.
Earlier in December 2017, the country announced that it would allow cryptocurrency exchanges under a set of conditions. These conditions include a need for the transactions to store customer funds securely, confirm user identities, establish money laundering systems, implement asset protection methods and avail of transparency.
Fraudulent activity in cryptocurrency related deals has increased in the recent past making regulation more desirable. In December, the police unearthed a Ponzi scheme involving MiningMax and the bitcoin exchange BitKRX valued for US$200 million.
But the country’s position on cryptocurrencies has been shaky and confusing. Hong Nam-ki, the minister for government policy coordination, said the country’s interest in cryptocurrencies was abnormal given that Prime Minister Lee Nak-Yeon warned that cryptocurrencies would corrupt youth and lead to “pathological social phenomena.”
Shutting down cryptocurrencies will have significant financial effects on companies and individuals. South Korea is second largest in Bitcoin trading after Japan and the United States.
Many other companies in the country are progressing with Bitcoin innovations and activity. Samsung announced in May a project to use blockchain to track shipping orders in real time. Kakao messaging app, which acquired fintech start-up Dunamu, launched its cryptocurrency exchange in October.
Nexon, a video game giant, is now the biggest shareholder in Korbit, the country’s third-largest cryptocurrency exchange.
Shutting down will also make cryptocurrencies less attractive in neighboring Asian nations. Experts say the situation needs the right combination of regulation and support.
Yoo Byung-Joon, business administration professor at Seoul National University and co-author of the 2015 research paper, said,
“There’s a delicate balance involved. Is Bitcoin a Viable E-Business?: Empirical Analysis of the Digital Currency’s Speculative Nature”.