South Korea: Since its inception, there has always been some dispute as to what cryptocurrencies actually are. The name should give you a clue, right? However, some do not believe that it is a currency.
On the one hand, this point of view could be frustrating for crypto enthusiasts, but it does have some surprising advantages. If it’s not a currency, then it cannot be regulated like one. This at least is the view of South Korea.
The country’s Financial Supervisory Service (FSS) has stated that because cryptocurrencies are not a form of legal tender, they will not be regulating its trade. However, the country will still be implementing stricter regulations against its biggest exchanges. This legislation will have a strong focus on investor protection and taxation.
Even though these regulations don’t pertain to trading, the country feels that rapid growth of the crypto market does call for some sort of framework. A government spokesperson has previously said:
“The South Korean government has no other choice but to follow the regulatory frameworks and trends established by other leading governments. While there certainly exists a negative reputation attached to cryptocurrencies, the government’s stance is to allow what has to be allowed, for the benefit of the South Korean market.”
These exchanges, which are Bithumb, Coinone and Korbit, reacted positively to the news, with Bithumb stating:
“A good set of regulations will nurture the (virtual currency) market, and we would welcome that.”
This doesn’t mean that the country is completely accepting of digital currencies though. FSS Governor, Choe Heung-sik, has stated that the institution will still caution the public about the risks relating to crypto. He said:
“All we can do is to warn people as we don’t see virtual currencies as actual types of currency, meaning that we cannot step up regulation for now.”
The FSS also believes that any regulatory action on their part will be perceived, by investors, as the country recognizing crypto as a legalized medium of exchange.
Heung-sik’s recent comments echo those made in November this year. At that time, the governor stated that the FSS will not be directly responsible for monitoring crypto exchanges simply because digital currencies are not a legal substitute for fiat currency.
Even though South Korea is not regulating the trade, they have issued rules with regard to cryptocurrencies.
In addition to these rules, the National Tax Service (NTS) is currently in the process of drafting a framework which will be used to collect tax on any crypto trading transaction in the country. It is also likely that the NTS issue capital gains taxes on both individuals and businesses who trade in crypto.
This means that the South Korean government will still be able to enjoy financial gains from the crypto industry without having to completely regulate it.