South Korea has adopted digital currency better than most countries. It is the third-largest Bitcoin market after the United States and Japan. It also registers over 20% of daily global transactions and is home to some of the biggest crypto exchanges in the world. South Korea has of late been making headlines for both good and bad reasons, thus prompting traders to monitor developments closely.
This article will give you a comprehensive insight into South Korea’s crypto market, the ongoing developments, and what the future possibly holds.
Size of South Korea’s Crypto Market
South Korea is the second largest crypto market in Asia after Japan. It attracts traders from all over the world, and several international crypto exchanges have even set up shops there.
The South Korean crypto market calls the shots when it comes to two of the world’s largest cryptocurrencies; Bitcoin Cash (BCH) and Ripple (XRP). More of these cryptocurrencies are traded here every day than anywhere else in the world. These and other cryptocurrencies and tokens are traded through some of the largest crypto exchanges in the world, all in South Korea (Bithumb, Coinone, and Coinnest are the largest in the country). Millions of dollars change hands every day when it comes to Bitcoin and Ripple alone, with crypto exchanges such as Bithumb and HitBTC conducting most of the transactions.
South Koreans have also adopted the use of Bitcoin and other digital currencies in their everyday lives. People use BTC to pay for a wide range of virtual services and personal transactions. Many people are also placing their hopes on digital currencies as they seek to cash in on the lucrative opportunities opened up by Bitcoin’s unprecedented success.
Regulating South Korea’s Crypto Market
The crypto industry was thrown into disarray last week following big developments inSouth Korea. Earlier on 11th January, Park Sang-ki, the head of the Ministry of Justice, announced that the government would soon shut down cryptocurrency trading. According to Minister Sang-ki, the government had come to this decision following extensive negotiations.
Expectedly, the news brought the global crypto market into a frenzy. Repercussions were immediate and were especially felt by Bitcoin. The price of Bitcoin fell as much as 21% by midday alone, trading at about $17,000. Other cryptocurrencies were also hit hard, and the shock was felt all over the world as South Korea is a major crypto market and player.
Most people were caught off-guard, but some seemed to have expected it. Several investors who spoke about the developments said that they had already liquefied their inventories or transferred them to exchanges abroad. Crypto exchanges also undertook major policy reforms in a bid to accommodate the news.
What Would Prompt This?
During its early stages, Bitcoin was nothing more than a viable concept. In fact, authoritative voices in the financial world called it a fraud, and it is still receiving criticism from acclaimed investors the likes of Warren Buffett. Today, the crypto market is so big that governments around the world are taking note. Several governments are already trying to regulate it, and Venezuela is even seeking to launch a national crypto. South Korea is just trying to do what most other countries are doing – reign in the highly lucrative market.
Before the announcement, South Korean police and financial authorities conducted a major crackdown on crypto exchanges, accusing them of tax evasion and money laundering. Undoubtedly, the government is concerned about the possible flaunting of financial laws by the unregulated crypto market. However, it is also seeking to cash in on the millions of dollars traded every day.
There Is Some Respite, for the Moment
Park Sang-ki’s announcement prompted angry reactions from South Koreans all over the country. In just a short period, over 60,000 South Koreans signed a petition to stop the government’s crackdown on crypto exchanges. Some were even calling for the firing of Park Sang-ki for making “reckless remarks.”
As it turns out, Minister Park Sang-ki had made the decision to shut down crypto trading in the country without consulting any other government departments. To South Koreans, this was a reckless move that shouldn’t go unpunished. Some analysts are even suggesting that the President may take action considering the new norm set after South Koreans strengthened their voice following the impeachment and imprisonment of the former president.
The Blue House recently released a statement saying that there were no plans to shut down the crypto market both in the short and long term. The news was received warmly, but crypto exchanges and traders know that they are not out of the danger zone yet.
The Future of South Korea’s Crypto Market
South Korea may have halted plans to shut down the crypto market, but it will certainly be moving to regulate the industry. Several regulations have already been passed:
Proof of Identity
One of the conveniences of Bitcoin and other cryptocurrencies is the anonymity involved. If you so prefer, you can trade Bitcoin and not have records track back to you. This, however, has been a cause of concern for many markets.
From now henceforth, the South Korean government requires that all exchanges be tied to bank accounts bearing the trader’s real names. This will make it easier to track transactions to actual people.
Money laundering is incredibly easy using cryptocurrencies. In fact, JP Morgan CEO once described Bitcoin as an ideal currency for shady deals such as paying assassins and drug dealers.
To prevent such scenarios, the government has stepped up its anti-money laundering laws, and crypto exchanges are required to comply. This also means that the government will monitor these exchanges and traders more closely.
The South Korean government has promised harsh consequences for crypto exchanges that do not comply with the new regulations. These will involve heavy fines and even revocation of licenses.
More Regulations to Come
The government is also expected to set more regulations as it asserts greater control in the markets. There are rumors that it may restrict trading to locals only, but this would be self-defeating if it expects to cash in on the millions of dollars traded every day – most of the transactions are international, after all.
How Are Exchanges Adapting?
Most exchanges are moving quikcly to adapt instead of appealing a case they would be unlikely to win. Cryptocurrencies are also still reeling, although stability is expected soon.
Experts suggest that some cryptocurrencies will be more affected than others. Bitcoin has already taken much of the heat, and its prices have not yet recovered. Some of the cryptocurrencies that are expected to face a bumpy ride include Bitcoin Gold (BTG), Ripple (XRP), Qtum (QTUM), and EOS (EOS).
Several exchanges have already announced major changes to avoid falling on the wrong side of the law. Some of these reforms include:
Several crypto exchanges, namely Bithumb, Coinone, and Upbit, have announced that clients will have to provide proof of identification before being issued with bank accounts. This is meant to discourage traders under the age of 19.
To this end, all clients under the age of 19 have been given a deadline to withdraw their cryptocurrencies or risk losing them altogether.
Suspension of Virtual Accounts
Most of the crypto exchanges have also decided to suspend virtual accounts as it is impossible to get proof of identification from their holders. This, however, will come at a great cost as they are mostly held by international clients. As such, foreigners seeking to transact in South Korea may be forced to open accounts with the local banks.
Everything Is Good for Now
Analysts say that the changes that have been affected in South Korea so far are mino,r and that they will not alter the market. For now, South Korea still remains a top destination for crypto traders from all over the world. Bitcoin is still trading at a premium of 30%, and prices will resume to their previous level and possibly surpass it soon.
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Have you been affected by South Korea’s move to regulate its local crypto market? What do you think the latest changes will mean for you? Share your thoughts with us in the comments below.