Bring the craze under controlThe fad over cryptocurrency has swept over the country. The value of virtual currency hit 24.99 million won ($22,822) on Friday on Bithumb, the country’s largest exchange of digital currency. It nosedived to 15.41 million won after authorities spoke of regulations likening the trade to gambling.
Bitcoin’s value has appreciated 20 times this year. College students, housewives, and retirees in their 70s are glued to their smartphones checking the numbers as they go up and down. As new cryptocurrencies have entered the market, dubious mining and investment agents have come out in full swing. Many have liken the phenomenon to the tulip mania that engrossed the Dutch in the 17th century.
The fever over cryptocurrency is exceptionally strong in Korea. Bloomberg called Korea the ground zero of the global bitcoin frenzy. The New York Times noted that a bitcoin investment boom like no other was panning out in Korea. Korea makes up 1.9 percent of global economy, but its share in global trade in digital currency totals 20 percent. Digital currency values are 23 percent more expensive in Korea against the global average. It does not take an expert to warn of bubbles.
The technology behind cryptocurrency is revolutionary. Blockchain is a novel technology based on a mathematical algorithm. The currency’s viability can be permanent as it cannot be controlled by monetary suppliers like central banks. Digital money will become essential in the future.
But the path for virtual currency to become mainstream remains challenging. Theft and hacking risks have not been solved. Holders of large amounts of bitcoin are referred to as “whales” and about 40 percent of bitcoin is believed to be held by about 1,000 whales. They can send prices nosediving if they dump even a small portion of their holdings.
The future of bitcoin therefore is not sure. It is why authorities are unsure and careful of addressing virtual currency. The latest frenzy, however, is a different matter. The government would hardly sit around if the entire nation was gambling. Regardless of long-term study of bitcoin, authorities must come up with immediate ways to cool the market. It should consider requiring permits to open exchanges and set guidelines on the eligibility in trade.
JoongAng Ilbo, Dec. 11, Page 38