Gov’t tries to get its ducks in a row on bitcoin

Chung Ki-joon, head of the Prime Minister’s Economic Policy Coordination Office, addresses the overheated cryptocurrency market on Monday. [YONHAP]

The government on Monday announced that it will respect market forces and allow cryptocurrency exchanges to continue to operate - but will crack down on any illegalities.

It also warned cryptocurrency investors that virtual currencies are not legal currencies and all the risk is on them.

The move follows highly mixed messages from the government last week about whether Korea’s frenzied cryptocurrency trade would continue - or be shut down.

“As we [the government] announced with our special measure on Dec. 28, we will forge ahead with real-name bank accounts [at cryptocurrency exchanges] while sternly countering illegal activities such as price manipulation, money laundering and tax evasion through joint investigations between the prosecutors’ office, police and the financial authorities,” said Chung Ki-joon, head of the Prime Minister’s Economic Policy Coordination Office, during a press briefing on Monday.

He stressed that at the moment, the government would not be shutting down cryptocurrency trading.

“The decision on whether to shut down the cryptocurrency exchanges will be decided after much discussion and coordination within the government,” Chung said.

The government reminded investors that the risks they take are their own and the government offers no protection from them.

“A cryptocurrency is not a legal currency and therefore no one can guarantee its value,” said Chung. “Therefore the prices could fluctuate sharply and massive losses [could be incurred depending] on illegal speculative investments and changes in domestic and overseas regulatory environments.”

To prevent any further policy confusion, the Prime Minister’s office will be acting as the command center for the government’s cryptocurrency policy.

Chung stressed that there was no miscommunication within the government, adding that last week’s comment about shutting down the exchanges by the Justice Minister was a proposal.

Last Thursday, Justice Minister Park Sang-ki announced that the government would be shutting down cryptocurrency exchanges, as it viewed them as speculation and gambling. Park said that all government departments agreed to the decision.

This sparked big fluctuations in the value of cryptocurrencies and some public outrage, including an online petition.

Just seven hours after the Justice Minister’s comment, the Blue House backtracked and said the decision wasn’t final. On the following day, Finance Minister Kim Dong-yeon tried to calm down infuriated investors by saying additional discussions were needed.

The Financial Supervisory Service also on Monday announced that it will launch a task force to monitor any disruptions including illegal activities involving cryptocurrencies.

Concerned over the government’s stance on the cryptocurrency market, some banks announced plans to stop opening new accounts on Friday, which were immediately reversed, adding to the confusion.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]