South Korea Cracks Down on Digital Currency Exchanges Amidst Confusion
The fate of South Korea’s digital currency exchanges is on shaky ground.
“There are great concerns regarding virtual currencies and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” said the South Korean Ministry of Justice in a statement to Reuters.
The news sent ripples throughout the global trading community causing the price of Bitcoin to drop over ten percent today.
South Korea is one of the world’s largest markets for digital currency trading. Demand for Bitcoin is so high in Korea that their exchanges often trade at a premium price.
Activity in the Korean markets has begun to cause concern for the government, who consider it more akin to gambling than trading. The government is also concerned that criminals use profits from Bitcoin trading to launder money or hide illegal actions.
The first steps towards a ban
The Ministry’s bill is part of a larger plan to regulate and possibly ban digital currency trading in South Korea. The process began in December when the government applied pressure to exchanges to require higher levels of verification for new customers.
The government is also investigating several banks for compliance with anti-money laundering and know-your-customer regulations.
Earlier this week, several Korean exchanges received visits from police and the National Tax Service, according to Reuters. This happened just days before the Ministry of Justice outlined its plans for a bill to ban exchanges.
Conflicting facts coming out of South Korea
In the chaos, the Minister of Finance has differing views on the digital currency ban.
In an official announcement, South Korean government reaffirms there will be NO TRADING BAN for #cryptocurrency market in the short term and NOTHING IS FINALIZED.
— Joseph Young (@iamjosephyoung) January 11, 2018
The Ministry of Finance has come forward to say there was no consensus on the Ministry of Justice’s announcement and that he found the news embarrassing.
Can a government stop digital currency?
Whether or not Korea will see a ban on trading seems unknown at this moment. Conflicting reports from the Ministry of Justice and Ministry of Finance add further uncertainty to the situation.
We are witnessing the emergence of decentralized exchanges, which operate on a blockchain platform such as Ethereum. If there is a ban on trading in Korea we may see much of the trading move to decentralized exchanges.
These exchanges are decentralized applications that run without human oversight. Once they are coded and launched onto the network, they cannot be turned off unless the entire network is turned off. Essentially, it would be next to impossible for a government to ban a decentralized exchange.
In global uncertainty, Canada shines
China has already faced a ban on digital currency trading, and now Korea may be facing a ban. We will likely see more countries following suit with attempts to control or ban what they may see as a threat to their own power.
At the moment Canada seems happy to embrace blockchain technology and digital currency. This has led to Canada becoming a leader in the field and a hub for innovation, with companies like Interbit and billionaire investor Mike Novogratz’s Galaxy Digital listed on the TSX Venture Exchange.
Regardless of the regulatory policies of countries, Bitcoin is stronger than ever. As Bill Gates, founder of Microsoft, famously said, no one can stop Bitcoin.
Image credit: Wikimedia Commons
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