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Historically, South Korea has been regarded as a crypto-friendly country. However, such a reputation has recently taken a hit, especially given the existence of the latest crypto-regulations being enacted. The country is back in the news after Hong Nam-ki, Deputy Prime Minister of Economy and Minister of Strategy and Finance, briefed the Special Committee on Budgets and Accounts on March 19 and said,
“Virtual assets and cryptocurrency sectors are overheating compared to their actual value.”
“(Overheating) can be a problem. From the standpoint of the economy, (investment) should be very cautious.”
The timing of these comments is intriguing, particularly given that new legislation are being debated. Similarly, beginning on March 25th, exchanges or cryptocurrency companies selling digital currencies must register the trade to centralised authorities while still adhering to the monitoring laws and registry rules outlined in the Special Financial Transaction Act.
In reality, exchanges, fund managers, wallet suppliers, custodial platforms, and others will be required to publicise their reports under the Financial Intelligence Unit, which will require service providers to implement customer recognition protocols as well as flag irregular trades to be referred to the FIU for further investigation.
The latest regulations force cryptocurrency companies to comply with the same within a 6-month timeframe, before September 24, or face a penalty of up to 50 million Won ($44,000).
That isn’t it, as the proposed Crypto Tax law, due to take effect in January 2022, is planned to impose a 20% tax on Bitcoin and crypto-gains above $2,300.
The influence of these legislation has been staggering, as shown by the announcement that OKEx, one of South Korea’s biggest cryptocurrency exchanges, has decided to close its local operations rather than comply with the new collection of regulations that go into effect on April 7th. In reality, several small-scale crypto-businesses have encountered difficulties in structuring deals and registering with local banks as a result of the new legislation.
It should be noted, however, that cryptocurrencies remain common in South Korea. In reality, the country saw 445 trillion won in transactions in January and February alone, with the same being led by an odd demographic – “Crypto Moms.”