Category Archives: South Korea Blockchain Regulation

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South Korea Pledges State Support to Build on Blockchain Successes

South Korea’s Ministry of Science and Information Communications Technology (ICT) has vowed to support the country’s already burgeoning blockchain industry.

At a meeting this week between Second Vice Minister of Science and ICT Min Won-ki and blockchain startups at the blockchain technology firm Blocko in Bundang, the minister pledged his government’s support for new startups.

Part of the purpose of the meeting was to listen to reps from domestic blockchain companies and hear out some of the challenges that they faced in the industry. South Korea has long viewed itself capable of being a leader in the blockchain space in East Asia and is keen to cement this situation moving forward.

Min said, “Considering the fact that there is no significant blockchain technology gap between South Korea and the other countries, it is a good opportunity for South Korea to lead the industry. The government will actively back domestic companies to help them lead the global blockchain market.”

Earlier this year, the South Korean government invested KRW 4.2 million (USD 3.75 million) into improving public services using blockchain applications for customs clearance, history of cattle, and simple property transaction. One purpose of the meeting was to review the successes of these projects. A statement was released after the meeting:

“We decided to hold the meeting in camera in order to hear out what challenges and difficulties the industry faces without making any kind of adjustments. This was to collect a candid opinion from the industry and help the government speak frankly with the industry.”

Some interesting developments came from the discussions, such as ensuring that the government creates fair conditions for both domestic and foreign blockchain developers in order that they would be able to place separate orders for bidding on projects by developing a cloud-based blockchain development environment.

Other nations including South Korea are still fine-tuning the regulatory side of the industry. Canada has postponed its release of regulations until 2020, and China is presently struggling to manage legal cases related to cryptocurrency due to unclear regulations.

 

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Growing Urgency for South Korean Crypto Legislation Approval

Hong Seong-ki, head of the virtual currency response team at South Korea’s Financial Services Commission (FSC), has called for lawmakers to quickly pass the first cryptocurrency bill in the country over security and money-laundering fears.

Investor protection

Hong makes acknowledgements that South Korea is lacking the frameworks to store and manage the burgeoning billions of dollars in cryptocurrencies due to its insufficient security measures.

On 25 July, Seong-ki said in an interview with Bloomberg, “While crypto markets have seen rapid growth, such trading platforms don’t seem to be well-enough prepared in terms of security… We’re trying to legislate the most urgent and important things first, aiming for money-laundering prevention and investor protection. The bill should be passed as soon as possible.”

Lawmakers in South Korea are being urged to pass the bill due to the accelerating growth of the cryptocurrency markets. A newly-drafted regulation framework seeks to legitimize domestic cryptocurrency and blockchain-related business practices for the first time in the country.

In the interview, Seong-ki made emphasis on the fact that the bill is not aimed at emerging cryptocurrency exchanges or trading generally speaking, but instead is there to protect users and investors through the implementation of vigorous internal management systems to prevent the large-scale and frequent hacks that are rife in South Korea.

Security issues

Significant hacking scandals in June 2018 forced regulators to speed up attempts to regulate cryptocurrency exchanges, putting a bill into motion that gives focus to money laundering. Should the bill pass, virtual currency exchanges will be required to report to the Financial Intelligence Unit (FIU) and be supervised regularly by the entity.

In late June, Bithumb suffered a USD 31 million hack; although, South Korea’s largest exchange did apply diligent measures to increase security against “high-risk” countries. Shortly after, the exchange managed to recover USD 14 million of the stolen crypto, with thanks to a collaborative effort between itself and other exchanges.

Rallying around blockchain

In May 2018, the South Korean government began setting in motion revisions to “unify” with the G20’s recommendations on cryptocurrency regulations.

From 13 July to 26 July, South Korean lawmakers from various political parties have been making draft bill submissions to create clearer regulations on initial coin offerings (ICOs), cryptocurrencies and blockchain technology.

Furthermore, it is expected that also on 26 July, further details regarding the “new-growth technology” tax credit scheme are said to be arriving.

With the Fourth Industrial Revolution around the corner, the Korean FSC announced a new governing body called the Financial Innovation Bureau, designed to protect consumers against risks that will present themselves in an age of financial technology innovations.

 

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South Korea Introduces New Crypto and Blockchain Classification Guidelines

The South Korean Financial Services Commission (FSC) has revealed new guidelines for cryptocurrency regulations, just as the nation’s central bank, the Bank of Korea (BOK), reported that total balance of Korean cryptocurrency investment as of December 2017 stood at almost USD 1.8 billion.

Recent events

South Korea has made frequent crypto-positive headlines in regards to cryptocurrency regulation and blockchain technology adoption. Recent news of major hacking attacks provoked a swift regulatory response from the South Korean government in June, sparking some concerns over how strict these regulations would be.

However, South Korea has been making significant efforts to revise these regulations in a positive light; regulators plan to ease the rules on regulations and the classification of cryptocurrencies in line with the G20 recommendations.

Bank of Korea’s crypto report

Local media outlet Yonhap News reported on 6 July that BOK released a report regarding the significant virtual crypto-assets being held by the nation’s commercial banks. Totalling KRW 2 trillion (USD 1.79 billion) as of December last year, the figure sits at roughly 8% of the total deposits by the country’s brokerage houses, which are worth 26 trillion won.

The BOK doesn’t see this as particularly significant, however, despite the cryptocurrency craze that appears to be sweeping the nation.

The BOK report said: “The amount of crypto-asset investment is not really big, compared with other equity markets, and local financial institutions’ exposure to possible risks of digital assets is insignificant… Against this backdrop, we expect crypto-assets to have a limited impact on the South Korean financial market.”

While this may not be considered to have a significant impact nationally, South Korea virtual currency trading accounted for approximately 12% of global crypto-trading volumes, making the nation a powerful market force internationally.

New classification system

Local media portal The BChain provided a detailed report that delved into the present details of the new crypto and blockchain classification system for the industry, which is broken down into ten categories including decentralized applications, blockchain systems, and cryptocurrency exchanges.

On 10 July, South Korea will begin enforcing the anti-money laundering banking rules on cryptocurrency settlements created by the FSC. Banks and other financial institutions in the country are to be obliged to carry out due diligence procedures for crypto-exchanges to their non-client accounts, as well as share overseas digital trading platform information with the FSC, and immediately stop suspicious crypto-transactions.

By the end of July, the government is expected to announce the final draft for the new regulations after it has conducted opinion research from more than 160 institutions. The survey on the nascent industry this year will provide data that is expected to be a positive and prominent guide for blockchain and cryptocurrency regulation.

 

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