South Korea Wants To Ban Crypto Trade, While Government Officials And Big Banks Make Millions
19 Gennaio 2018 - 12:15PM
ADVFN Crypto NewsWire
South Korea’s market-rattling drama over an impending
cryptocurrency trade ban added another layer of complexity today.
While the government has been deliberately vague about when and how
strictly it will crack down on cryptocurrency activities, it has
emerged that at least one financial regulatory employee was
allegedly banking on the cryptocurrency craze through insider
trading and big banks made millions of dollars last year on
commissions.
The Financial Supervisory Service director Choi Heung-sik told
lawmakers his agency is investigating a claim that one of its three
employees who are part of a pan-government crypto regulation
task force was using internal information to
profit off cryptocurrency. According to reports citing the FSS, the
employee gained about 50% in profit by
selling cryptocurrency last month two days before a major
government announcement on Dec. 13 that proposed to ban minors and
nonresident foreigners from trading.
He made around 7 million won ($6,500) in profit, but the
employee apparently claimed he was on vacation at the time and
didn’t know the measures were to be announced.
Crypto fever among civil servants is so strong that Hong Nam-ki,
Minister of the Office for Government Policy Coordination (OPC), on
Thursday had to tell government departments that “cryptocurrency
investments by government officials is inappropriate” and to ensure
that cryptocurrency is not traded during work hours. According to
Hong, at least one or two cases of employee insider trading are
under investigation.
Ever since South Korea’s justice minister Park Sang-ki last week
opened the lid on a plan to shutter cryptocurrency exchanges to
stamp out the country’s feverish speculative trading, the
government has been scrambling to clarify its stance. The
presidential Blue House quickly said nothing was confirmed, but
today the chief financial regulator told parliament the government
was considering multiple options,
including a blanket shutdown of cryptocurrency exchanges and a
closure of only the ones acting illegally.
With all the uncertainty, local traders have gone into hiding --
the Korean won, once the second-most traded currency for Bitcoin
and Ether, has slid to fifth and fourth place, respectively,
according to CryptoCompare.
South Korean traders have gone into hiding amid government
uncertainties.
But the government may meet resistance from big banks, which
earned 2.2 billion won ($2
million) in cryptocurrency trade commissions last year. Six
major banks including Industrial Bank of Korea, Nonghyup Bank and
even the state-owned Korea Development Bank, which together hold $2
billion in users’ cryptocurrency accounts, each took home up to
$630,000 on commission from trade last year. They’re the same banks
that financial regulators investigated last week to check their
internal controls on money laundering prevention and identity
verification.
The recent reports of civil servants’ insider trading has thrown
fuel onto the fire of outraged citizens, more than 200,000 of whom
signed a petition to demand the presidential Blue House to respond
to the mayhem and clarify its stance. Opponents of the ban in South
Korea fear a blanket ban would lead to a massive asset outflow as
traders move their coins to overseas accounts. Within parliament,
conservative lawmakers are railing against the liberal Moon Jae-in
administration for turning the local crypto trade industry into a
“rollercoaster.”
Despite South Korea being one of the biggest markets for
Bitcoin, Ether and more recently Ripple, cryptocurrency activity is
largely unregulated as the central bank and financial regulators
refuse to recognize it as a currency or financial product. Prices
of coins reach as high as 45 percent above the global average, but
few can take advantage of the arbitrage opportunity due to the
country’s tough remittance regulations.
While the government remained largely silent last year as South
Korea shot to one of the top markets for major cryptocurrencies, it
piped up in November - around the same time China banned
cryptocurrency trade - to announce a potential ban against initial
coin offerings as it launched investigations into crypto
crimes.
Related reading on Forbes: 5 Times Cryptocurrencies
Rocked South Korea In 2017
Since then, the government has vowed to take action against
crypto-related illegal conduct such as market price manipulation,
money laundering and tax evasion. Financial authorities on Sunday
said they would require traders to put their real names on their
crypto accounts, or face fines. Despite news of impending trade
ban, the requirement could be seen as a positive effort to
recognize and legitimize trade.
None of the government’s proposed regulations have taken form
yet, but many in the local industry are bracing for the imminence
of something strict. Amid the instability, Korean blockchain
startups have been flocking to countries like Switzerland and
Estonia to set up their ICOs.
While the government has not firmed up a timeline for publishing
regulations, officials say they’re rushing to lay something out as
soon as possible. But experts say it may take six months to a year
for a bill to pass through President Moon’s Democratic Party-led
National Assembly, a process that could get even more muddied as a
by-election in June may shake up the assembly member seats.
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