Revenge of the bitcoin maniacsOn Jan. 4, President Moon Jae-in was accompanied by Financial Services Commission (FSC) chief Choi Jong-ku on a visit to the main dockyard on Geoje Island of Daewoo Shipbuilding and Marine Engineering. “Nothing can be done without the finances,” Moon said. Choi’s face immediately reddened while others laughed at the president’s joking comment. The message was pretty obvious. The liberal president did not want to see anything go wrong with the shipyard, which had been bailed out many times. With that vote of confidence from the president, shares of the once-mighty shipbuilder went up 12.5 percent that day.
Most of Moon’s liberal aides in the Blue House do not trust the market and free competition. They have more confidence in the president’s power than the market’s invisible hand. The president’s approval rating, hovering over 70 percent, has not come down a bit in his first eight months. He has worshippers who come to his defense on the internet. They believe good politicking can cover the flips and flops of the administration’s economic policies.
But their confidence has been shaken by the bitcoin debacle. Moon skipped comments before a secretariat meeting discussing the cryptocurrency situation. The presidential spokesman did not brief the press about what was discussed at the meeting. The presidential office was that sensitive to the cryptocurrency issue.
Moon’s aides admit that they took Korea’s cryptocurrency mania too lightly. They regret that they responded prematurely and without much thought. The Park Geun-hye administration launched a task force on cryptocurrencies in 2016. But it got nothing done. The phenomenon came into the international spotlight after prices skyrocketed here after a ban on cryptocurrency trade in China last September.
The Blue House took action after hearing that college and even middle school students were going bananas for bitcoin. Justice Minister Park Sang-ki was put in charge of a second task force on Dec. 4. The government saw the virtual currencies as gambling chips. To them, speculation for the sake of profit was a crime. The Blue House thought the Justice Ministry should be in charge of a campaign against any such speculation. Prosecutors raided the biggest exchanges and dug into hacking and other suspicious practices. The National Tax Service embarked on its own tax probe.
Last week, the justice minister said the government would shut down cryptocurrency exchanges. Choi of the FSC joined the chorus, saying the ban was discussed among government offices. The market was severely rattled. The bitcoin value tumbled 25 percent. Enraged people in their 20s and 30s bombarded the Blue House website accusing the government of stripping them of their last-remaining hopes and dreams in this country.
They took their vitriol to cyberspace and called for Moon’s impeachment. They told other cryptocurrency fans to take vengeance against the president and his party in June local elections. Soon their comments had over 20,000 “likes.”
Seven hours after Justice Minister Park’s comment, a stunned Blue House denied that the ban was final. The mood dramatically reversed in the administration as well. The Financial Supervisory Service, which threatened banks not to open new accounts or accept anonymous traders’ money, retreated with its tail between its legs. Instead of slamming cryptocurrency trade as gambling, authorities are making sure bank accounts are opened under people’s actual names. They are legitimizing the trade.
The fiasco is expected to have a lasting cost. Virtual money investors complain that Moon wiped out 100 trillion won ($93.5 billion) in value in seven hours. Some even rant that impeached President Park Geun-hye might have stolen money from Samsung Group, but Moon has stolen their money. Anger is spilling over to other policies of Moon such as the minimum wage hike and inviting North Koreans to the PyeongChang Winter Olympics.
The Blue House was panicked by the anger of its young voter base. Resentment about economic deprivation outweighs political allegiances sometimes. The most frequent visitors to the Blue House these days are tax and budget directors from the Ministry of Strategy and Finance. The Blue House tends to make amends with tax breaks as it has done with the minimum wage hike and nuclear reactor-phase out policies. But the presidential office has no grounds to compensate cryptocurrency traders for their losses. Inviting hundreds to the Blue House for beer is out of the question. It may have to pay the price for running an economy poorly.
JoongAng Ilbo, Jan. 17, Page 31
*The author is a senior editorial writer of the JoongAng Ilbo.