S Korea plans to introduce regulatory framework for digital currencies

Maria Nikolova

Park Yong-jin of the ruling Democratic Party of Korea is proposing legal changes that will require (inter alia) companies involved cryptocurrency transactions to obtain permissions from the Korean financial regulator.

More countries are examining ways to regulate the market for cryptocurrencies and the businesses active in it. The latest example comes from South Korea, where the Korea Herald reports of planned legislative changes for the digital currencies market.

Rep. Park Yong-jin of the ruling Democratic Party of Korea is planning to introduce revisions to the the Electronic Financial Transactions Act and the laws on income tax and corporate tax that will affect this segment.

The amendment to the Electronic Financial Transactions Act envisages that brokers, or other business entities involved in cryptocurrency transactions would be required to get regulatory approval from the Financial Services Commission. The requirements include a minimum of capital of KRW 500 million and maintaining certain data processing facilities.

Also, revisions to the laws on income tax and corporate tax would allow financial authorities to tackle tax evasion from the digital currency transactions.

Whereas the volatility of bitcoin prices has attracted many traders and businesses to this market, many question the foundations of the price movements. Alike Paul Orford, Mr Park compares the hectic growth of interest in cryptocurrencies seen now with the “tulip mania” that engulfed the Netherlands in the 17th century.

In June this year, the Korea Asset Management Corporation (KAMCO) announced it would be auctioning auctioning 216 bitcoins, confiscated from the owner of an “obscene website”. KAMCO is following the example of the US Marshals Service which has regularly conducted auctions of bitcoins confiscated as a result of arrest of criminals – for instance, the closure of Silk Road and the arrest of its mastermind Ross Ulbricht.

South Korea is one of the hotspots for Bitcoin trading. The high demand, however, goes along with a high rate of fraud and cyber problems.

In April, South Korean cryptocurrency exchange Yapizon reported that it had been targeted by hackers and claimed the loss of BTC 3,831 in customer funds as a result – back then, that equalled about $5 million. The customers of the Exchange had to pay for the damage from their own account balances.

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