Gov’t casts wary eye on cryptocurrency trade

The Korean government is toughening its attitude toward cryptocurrencies and their trade in the local market. Earlier this week, the government shifted authority over regulation of cryptocurrencies from the Financial Services Commission to the Ministry of Justice.

On Monday, the government launched a task force to “implement strict regulations on cryptocurrency trading.”

“Speculative trading is on the rise and the number of criminal activities involving cryptocurrencies is also increasing,” said Kim Yong-beom, vice chairman of the Financial Services Commission, in a meeting on Monday. “As it becomes necessary for more serious measures, [the government] has decided to respond aggressively by introducing regulatory measures with the Ministry of Justice in charge.”

Other government bodies involved in the task force include the Ministry of Strategy and Finance, the Financial Services Commission, the Bank of Korea, the National Tax Service and the National Police Agency.

Putting the Ministry of Justice in charge is an apparent indicator that the Moon Jae-in administration considers cryptocurrency trading more like speculation or gambling than legitimate financial product investment or currency trading, according to a source in the ministry.

The ministry made its stance on cryptocurrencies clear through a press release on Monday as well, saying it sees cryptocurrencies as being without inherent value as there is no central government or institution behind them, leaving their prices prone to drastic fluctuations. It also said the products currently being traded - such as bitcoin and ethereum - cannot have their liquidity guaranteed. The ministry said cryptocurrencies cannot be considered a kind of “gold of the future,” which means it does not see them as commodities either.

The launch of the task force on Monday is seen as proof of recent rumors that the Korean government would crack down on such trade in Korea, which is the third largest cryptocurrency market in the world behind the United States and Japan.

The announcement didn’t immediately affect the market. Bithumb, the biggest cryptocurrency trading platform in Korea, said it saw no drastic fall in trading volume on its website, adding that it will accept the government’s policies and cooperate in any way necessary.

The government’s intention to rein in the market raises concerns among experts that it will limit technological advances - namely in blockchain technology, which is behind the development of cryptocurrencies.

“The idea that the government will come up with regulations [on cryptocurrencies] with the Ministry of Justice at the center is disconcerting,” said Choi Woon-yeol, a representative from the ruling Minjoo Party during a hearing on Monday at the National Assembly. “It’s not appropriate to have the Ministry of Justice, which is ‘regulatory-minded,’ in charge of any kind of regulatory framework to prepare for the fourth industrial revolution.”

“A relentless and poorly organized crackdown on cryptocurrency will inevitably hamper the development of public blockchain systems,” said an industry expert who requested anonymity.

BY CHOI HYUNG-JO, KO RAN [choi.hyungjo@joongang.co.kr]