A needle finds its bubbleOver 3 million Koreans owning cryptocurrencies are in a state of panic. Banks are under scrutiny by financial regulators for their dealings with cryptocurrency exchanges. The value of the cryptocurrencies whipsawed after the justice minister said the government was serious about banning cryptocurrency trading in Korea. Shinhan Bank stopped payments to accounts held for cryptocurrency trade and initially told the three major exchanges including Bithumb that it would no longer supply online banking services. KB Kookmin and other commercial banks are awaiting specific guidelines from authorities before taking actions.
The authorities are being blamed for the chaos in one of the world’s biggest cryptocurrency markets. Justice Minister Park Sang-ki told reporters that the government was in agreement to pursue a special law to ban cryptocurrency trading after concluding it was as hazardous to society as gambling. The Blue House denied that plan after being bombarded with online petitioners. The minister unveiled a half-baked idea which had not been thoroughly discussed and coordinated with other government offices including the finance and ICT ministries. The market is in limbo because nothing has been cleared up.
Bureaucrats have been tossing this issue around like a hot potato. At one point, bitcoin traded in Korea at prices 30 percent higher than overseas while bureaucrats wrangled over whether it has any real value or not. A premium of as much as 30 percent is unquestionably speculative.
Alarmed at the size of the bubble, authorities suddenly came in with a needle. Of course, to a needle, everything looks like a bubble. The government should have focused on cooling off the market. Despite arguments on its true value, Bitcoin joined the Chicago futures exchanges based on its commercial investment potential. Moreover, the blockchain technology that underpins cryptocurrencies could become the backbone of fintech in the so-called fourth industrial revolution. That’s something we can’t afford to ignore.
The government should have concentrated on making the trade as safe and transparent as possible. It must come up with a tax system for the transactions as all income should be taxable. The Finance Ministry should revise this year’s tax code to include cryptocurrency trade. Authorities must demonstrate calmness and devise reliable policy-making to stop the chaos.
JoongAng Ilbo, Jan. 13, Page 26