The South Korean government has released a number of rules that Bitcoin traders and exchanges must follow in a bid to regulate digital currency trading in the Asian country. What are the advantages and disadvantages of this development?
After weeks of suspense, the South Korean government has finally shown its cards concerning Bitcoin trading and regulation. The global crypto market had suffered a slide after reports emerged that the government would ban trading of virtual currencies. Before this, prices were at an all-time high, trading was in a frenzy nationwide and things were getting out of control. So the government decided to step in.
They have now put in place rules and regulations for anyone interested in cryptocurrency in South Korea to obey.
Failure to follow these rules will result in the inability to trade crypto coins.
New crypto rules
According to the government, these new rules are geared to monitor the exchanges and crack down on speculative trading and possible crimes. And amidst a plethora of banks refusing to fund crypto accounts, six banks have emerged, indicating interest to allow funding of these accounts but in collaboration with authorities. They are Shinhan Bank, Nonghyup Bank, Industrial Bank, Kookmin Bank, Hana Bank and Gwangju Bank.
Here are the new rules:
- Starting from January 30th, only crypto accounts linked to a bank account with matching names will be allowed to trade.
- Foreign citizens (both natives and non-natives) will not be allowed to trade crypto coins.
- Exchanges now have to pay a corporation tax and local income tax for 2017 profits amounting to 24.2%.
- Banks are to monitor crypto trading that exceeds 10 million won ($9,338) a day or 20 million won ($18,676) per week and accounts owned by corporations or groups. Any suspicious activity will be reported to authorities.
"It could have been worse". This is the reaction of many people to the development. There had been apprehension about that the South Korean government would outrightly ban Bitcoin, which is part of the reason the market depreciated heavily recently.
However, instead of ban or restrictions, the government is allowing it and even promoting it, getting banks involved. And in exchange, they will have transactions documented and earnings taxed. This stamp of endorsement could convince more people to set up accounts which would drive more money to the market ultimately.
It's hoped that these rules will be reviewed and adjusted as time goes to the overall benefit of the market.
One sore thumb that stuck out is that these rules violate the privacy of traders, which is the core value of Bitcoin and the main reason for its existence. No anonymity means you can now get banned or have your account blocked without a moment's notice for any reason whatsoever.
This move places power in the palms of banks and exchanges and they can now make their own set of rules. With anonymity removed, you're bound to attract attention if you record any significant amount of success. And people who want to do anything evil will only have to parley with bank heads and exchange authorities to do their deed.
Another bad feeling about these rules is that it makes traders and exchanges more vulnerable to hackers. A centralized system is easily attacked than a decentralized one. Crypto accounts on exchanges whose banks have been hacked will be easily compromised because hackers already have their information.
The nagging worry about these rules is that South Koreans won't like it and avoid exchanges like the plague. It already has a negative effect on the market- Bitcoin price has dropped 4% in reaction to the news. It's possible these rules could kill mainstream adoption of Bitcoin in South Korea.