South Korea plans to ban cryptocurrency trading, rattles market
The South Korean government on Thursday said it plans to ban cryptocurrency trading, sending bitcoin prices plummeting and throwing the virtual coin market into turmoil as the nation’s police and tax authorities raided local exchanges on alleged tax evasion.
The clampdown in South Korea, a crucial source of global demand for cryptocurrency, came as policymaker around the world struggled to regulate an asset whose value has skyrocketed over the last year.
Justice minister Park Sang-ki said the government is preparing a bill to ban trading of the virtual currency on domestic exchanges.
“There are great concerns regarding virtual currencies and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” said Park at a press conference, according to the ministry’s press office.
A press official said the proposed ban on cryptocurrency trading was announced after “enough discussion” with other government agencies including the nation’s finance ministry and financial regulators.
Once a bill is drafted, legislation for an outright ban of virtual coin trading will require a majority vote of the total 297 members of the National Assembly, a process that could take months or even years.
The government’s tough stance triggered a selloff of the cyrptocurrency on both local and offshore exchanges.
The local price of bitcoin plunged as much as 21 percent in midday trade to 18.3 million won ($17,064.53) after the minister’s comments. It still trades at around a 30 percent premium compared to other countries.
Bitcoin BTC=BTSP was down more than 10 percent on the Luxembourg-based Bitstamp at $13,199, after earlier dropping as low as $13,120, its weakest since Jan. 2.
South Korea’s cryptocurrency-related shares were also hammered. Vidente (121800.KQ) and Omnitel (057680.KQ), which are stakeholders of Bithumb, skidded by the daily trading limit of 30 percent each.
Once enforced, South Korea’s ban “will make trading difficult here, but not impossible,” said Mun Chong-hyun, chief analyst at EST Security.
“Keen traders, especially hackers, will find it tough to cash out their gains from virtual coin investments in Korea but they can go overseas, for example Japan,” Mun said.
Park Nok-sun, a cryptocurrency analyst at NH Investment & Securities, said the herd behavior in South Korea’s virtual coin market has raised concerns.
Indeed, bitcoin BTC=BTSP’s 1,500 percent surge last year has stoked huge demand for cryptocurency in South Korea, drawing college students to housewives and sparking worries of a gambling addiction.
“Some officials are pushing for stronger and stronger regulations because they only see more (investors) jumping in, not out,” Park said.
By Thursday afternoon, the Justice Ministry’s announcement had prompted more than 55,000 South Koreans to join a petition asking the presidential Blue House to halt the crackdown on the virtual currency, making the Blue House website intermittently unavailable due to heavy traffic, the website showed.
There are more than a dozen cryptocurrency exchanges in South Korea, according to Korea Blockchain Industry Association.
The proliferation of the virtual currency and the accompanying trading frenzy have raised eyebrows among regulators globally, though many central banks have refrained from supervising cryptocurrencies themselves.
The news on South Korea’s proposed ban came as authorities tightened their grip on some of the cryptocurrency exchanges.
The nation’s largest cryptocurrency exchanges like Coinone and Bithumb were raided by police and tax agencies this week for alleged tax evasion. The raids follow moves by the finance ministry to identify ways to tax the market that has become as big as the nation’s small-cap Kosdaq index in terms of daily trading volume.
Some investors appeared to have taken preemptive action.
”I have already cashed most of mine (virtual coins) as I was aware that something was coming up in a couple of days,” said Eoh Kyung-hoon, a 23-year old investor.
Bitcoin sank on Monday after website CoinMarketCap removed prices from South Korean exchanges, because coins were trading at a premium of about 30 percent in Asia’s fourth largest economy. That created confusion and triggered a broad selloff among investors.
An official at Coinone told Reuters that a few officials from the National Tax Service raided the company’s office this week. The official, who spoke on condition of anonymity, said that Coinone was cooperating with the investigation.
Bithumb, the second largest virtual currency operator in South Korea, was also raided by the tax authorities on Wednesday.
“We were asked by the tax officials to disclose paperwork,” an official at Bithumb said, requesting anonymity due to the sensitivity of the issue.
The nation’s tax office and police declined to confirm whether they raided the local exchanges.
South Korean financial authorities had previously said they are inspecting six local banks that offer virtual currency accounts to institutions, amid concerns the increasing use of such assets could lead to a surge in crime.
Written by Reuters
Russian Ministry of Labor: Gov’t Workers Exempt From Declaring Cryptocurrency Gains
The Russian Ministry of Labor’s updated income, expenses and property declaration guidelinesfor government employees for reporting on 2017 includes a point about cryptocurrency, local media outlet Izvestia reports. The updated regulations state that government employees do not have to declare “virtual currencies” they obtained.
The note about cryptocurrency was added to an already existing point that stated government employees were not required to declare “goods and services in their natural forms,” adding laconically “as well as virtual currencies.”
Representatives from the Ministry of Labor told local news outlet RBC that they do not currently require cryptocurrency to be declared because of Russia’s general lack of legislation in the space, stating:
“At present, approaches to the definition and regulation of cryptocurrencies in the Russian Federation at the legislative level are not defined.”
Risk for corruption
Russian officials have been required to make public declarations about their income since 2009. ‘Experts’ pointed out to Izvestia that the ruling increased the risk of receiving bribes in cryptocurrency that would go undisclosed, according to the guidelines.
However, Vladislav Tsepkov of the “Business Against Corruption” Center, an organization created by the Russian government in 2011 to protect entrepreneurs’ rights, told Izvestia that they saw the risk of government workers taking bribes in crypto as “minimal,” noting:
“But cryptocurrency is not a means of payment, it cannot be spent. If they [government workers] sell it and get real income, then it will need to be declared, so the risks are minimal.”
Izvestia noted that according to the same regulations, it is required that government workers declare gifts of “real,” or fiat, money from friends or family.
These changes come at a time when Russian corruption is at an all time high. According to the statistics on the matter, corruption has increased more than thirty percent in Russia since 2008.
The Russian government has yet to create legislation that explicitly covers digital currencies. The country’s government and central bank generally have a negative stance on the subject, calling cryptocurrencies “high risk,” especially for mainstream investors.
Written by CoinTelegraph
Goldman Sachs Admits Bitcoin is Real Money, Cites Use Cases in Developing World
White shoe investment bank Goldman Sachs has admitted that Bitcoin and other digital currencies could succeed as real money in developing economies. Goldman strategists wrote in a recent report:
“In recent decades the U.S. dollar has served its purpose relatively well. [But] in those countries and corners of the financial system where the traditional services of money are inadequately supplied, Bitcoin (and cryptocurrencies more generally) may offer viable alternatives.”
Nonetheless, the investment bank warns against expecting 2017-level returns:
“Our working assumption is that long-run cryptocurrency returns should be equal to (or slightly below) growth in global real output—a number in the low single digits. Thus, digital currencies should be thought of as low/zero return or hedge-like assets, akin to gold or certain other metals.”
This is a remarkable change of tune from the skepticism with which big banks and “mainstream” investors have generally treated digital currency. JPMorgan Chase CEO Jamie Dimon famously called Bitcoin a fraud last year, while legendary billionaire investor Warren Buffett insists that Bitcoin isn’t money and people should stay away. Likewise, hedge fund magnate Ray Dalio dismisses Bitcoin as a bubble.
Goldman Sachs holds outsized influence in the world of finance and politics. Both The Independent and Al Jazeera refer to Goldman as the bank that controls the world. The Atlantic is only slightly more subtle, referring to Goldman Sachs’ growing influence in the US government as “The Quiet Coup.”
Likewise, the Huffington Post has written extensively about the “revolving door” between Goldman Sachs and the US government. The publication points out that two Goldman Sachs CEOs – Rubin and Paulson – have served as US Treasury Secretary, and former CEO Jon Corzine became a US senator. Other Goldman alums serve in various positions throughout government and finance.
Written By CoinTelegraph
New Voice for Crypto: Japanese Pop Group ‘Virtual Currency Girls’
A new wave of cryptocurrency popularity in Japan has spawned many things – the latest being a pop group known as the ‘Virtual Currency Girls.’
Due to its relaxed attitude towards cryptocurrencies, Japan’s government has created a thriving atmosphere for cryptocurrencies in the country. Eastern neighbors Korea and China have enforced heavy regulations that have tried to stifle a movement that is conversely gaining massive traction in the land of the rising sun.
One needs to look no further than Internet sensation Miss Bitcoin to see that the Japanese are a people that are embracing change, in the form of virtual currency.
Following in her wake is a new Japanese Pop (J-Pop) group that hope to educate people about cryptocurrency.
Virtual Currency Girls
Virtual Currency Girls is comprised of eight band members known as ‘Kaso Tsuka Shojo.’ Each singer takes up the identity of a number of different virtual currencies including Bitcoin and Ethereum.
J-Pop has been massive since its inception in the 1990s – and it seems the music group could pioneer a new way of spreading information about cryptocurrency and the potential benefits they could have for society.
According to the group’s leader, 19-year-old Rara Naruse, the pop group hopes to shed some light on the intended use of cryptocurrencies as quoted by Japan Today:
“This unit is not here to promote speculation or investment. Out of the numerous existing virtual currencies, we have carefully selected a handful of currencies that are sure to exist in the future in order to broaden the public’s understanding of them using entertainment as our medium.”
According to AFP, the group will hold its first concert on Friday, Jan. 12 in Tokyo.
Written by CoinTelegraph
Korea’s Central Bank Forms Task Force to Study Cryptocurrency Impact
The Bank of Korea (BoK), South Korea’s central bank, has launched a cryptocurrency task force to explore the technology’s effects on the financial system.
According to a report by local news agency Pulse News, the bank said that the task force will see participation from eight departments, including the financial stability and monetary policy units, to study on the impacts of digital currency.
The new group will be administered and assisted by BoK’s payment and settlement department and will be headed by Shin Ho-soon, deputy governor of central bank, the report adds. BoK is also seeking to explore a central bank-backed digital currency as part of the project.
The announcement follows concerns raised in South Korea that the drastic growth in cryptocurrency prices could effect the traditional financial system.
Earlier this week, six unnamed banks in South Korea were scrutinized the Korean Financial Intelligence Unit and the Financial Supervisory Service for their relationship with the country’s bitcoin exchange ecosystem. The regulators indicated at the time that they were looking into whether the banks are complying with their anti-money laundering (AML) obligations when transacting with cryptocurrency exchanges.
The government already said last month that it would move to apply more scrutiny amid growing trade volume at the exchanges, including a possible ban on anonymous trading. Earlier today, new reports suggested that the government of South Korea is intensifying its moves against the country’s bitcoin exchanges.
Bank of Korea image via Shutterstock