Government to introduce regulations for Bitcoin

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Government to introduce regulations for Bitcoin

In response to the growing popularity of Bitcoin and other digital currencies traded online, the country’s financial regulator said Thursday that it would introduce regulatory guidelines for digital currency exchanges by the first quarter of next year.

The Financial Services Commission has launched a task force that will meet regularly to discuss the regulatory status of digital currency and create licensing rules for exchanges as well as devise measures to prevent money laundering and fraud in transactions.

Currently, the Ministry of Science, ICT and Future Planning oversees registration of Bitcoin operators but offers no financial regulatory guidelines.

The top three Bitcoin exchanges in the country processed around 1.5 trillion won ($1.3 billion) between January 2015 and October 2016, according to data from the regulatory commission. The Financial Services Commission said average monthly transactions in 2016 increased by 6 percent compared to last year.

During the first meeting, the task force primarily agreed on the view that the sector needs to be regulated, adding that they would refer to legal frameworks in the United States and Japan. Regulations on Bitcoin vary state by state in America, while Japan requires Bitcoin operators to register for a license.

The Financial Services Commission indicated that the set of new rules might include strong regulations to prevent illegal use of digital currency exchanges. “Digital currency is often used for money laundering, drug trafficking and tax-related crimes since it is free from regulation,” the commission said.

Korean financial authorities tend to go tough on new financial services due to concerns about illegal use, even as the government seeks to promote new areas of financial technology, or fintech. In the latest example, the Financial Services Commission announced a guideline limiting the maximum amount of investment in peer-to-peer lending, a relatively new loan service in Korea that connects borrowers with investors.

The regulator cited cases of peer-to-peer lenders mishandling funds from investors in the United Kingdom and China.

Besides Bitcoin, there are over 700 digital currencies circulating around the world.

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