Category Archives: South Korea Regulation

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South Korea Triples Blockchain Budget to $35 Million

The South Korean government will be tripling investments into the development of blockchain technology as well as industries that include distributed ledger technology (DLT).

“In agreement”

Korea Economic Daily has reported that a recent meeting held between a number of government entities has resulted in the rollout of an increased blockchain budget worth KRW 40 million (USD 35 million), which is triple that of 2018’s.

With DLT and blockchain technology at the center of the discussion, the Ministry of Science and ICT, Ministry of Information and Communication, the Democratic Party of Korea, as well as others were present to hear the announcement made by Vice Minister of Health and Welfare.

The Second Vice Minister of the Ministry of Science and ICT said that “everyone agrees that the blockchain is a technology to change the future… This is why we organized the budget for 40 billion won, and this year we will increase the number of projects to sixteen public areas including real estate transactions and personal clearance to 12 next year.”

Accordingly, the Ministry of Information and Communication will be providing technical, verification and consulting services for blockchain startups in 2019.

Infrastructure plus resources

Blockchain-related enterprises are garnering a great deal of attention in South Korea, recently its largest domestic venture capitalist (VC) firm stepped into space and invested in a supply chain solution powered by the EOS network. This is not a unique case; South Korean enterprises are clamoring to partner up with blockchain companies, bolstering positive industry perceptions of technology.

Outside of private entities, public sector blockchain projects are set to be doubled in 2019, backed by further pledges to support the industry from the Ministry of Science and ICT. Furthermore, the blockchain workforce is being propelled by educational courses and other funding initiatives to develop the next generation of experts in anticipation of a blockchain future.


However during the meeting, University of Kyunghee Professor, Han Ho-hyun was not entirely impressed with the budget that had been announced. He conceded that it was “difficult to secure KRW 40 billion by tripling next year”, and in comparison to other nations who are investing “tens of trillions”, the professor bullishly claimed that “we can invest more than KRW 100 trillion in three years.”

This was contested by the head of blockchain and convergence at the Informational and Communication Technology Promotion Center (IITP), who said, “If I invest USD 1 trillion in building a blockchain budget in IITP, you need to see if you need additional inputs.”

Initial coin offerings

South Korea is preparing its next phase of blockchain development as the ICO legal status decision nears its due date. In October, it was formally announced that the contentious issue of ICOs would be settled once and for all, which could prove to be a defining moment for domestic and global blockchain industries.


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South Korea Blockchain Association Presses for Regulation Efforts

The South Korean Blockchain Enterprise Promotion Association (BEPA) is demanding for the government to speed up blockchain and cryptocurrency adoption and regulation efforts.

Time for urgency

A report from a local news outlet, Korea Joongang Daily, has said that the association filed this demand to curb the government’s focus on “negative short-term side effects” and instead urges it to observe the global blockchain race and adopt a means to reap the economic benefits sooner than later.

Yoo Joon-sand, president of BEPA told a press briefing: “Countries around the world are applying blockchain technology to all aspects of society including health care, retail and logistics.”

He adds, “But instead of welcoming the people’s fervor for the technology, the government is focused on controlling it to address negative short-term side effects. This is essentially kicking away the economic opportunities that lie in front of us.”

The blockchain push

The association, formed on 17 July, is comprised of ex-politicians and academics with significant members such as former Prime Minister Lee Soo-sung and Professor Kim Hyoung-joong, head of Korea University’s Cryptocurrency Center at the Graduate School of Information Technology.

Furthermore, with their combined technological and governmental experience, members of the association wish to also push the regulation of blockchain technologies so that they can be applied to “diverse industries”, which is expected to be a catalyst for job creation and reduce financial burdens for small business owners.

According to the report, the members of the association believe that should the nation be ready with a full-body of regulations, then South Korea can witness explosive job creation and “pave the way for Korea to lead the world in the fourth industrial revolution“.

South Korea has already made vows with the United States to collaborate on a multitude challenges and facets of this coming era, with blockchain being one of the technologies in focus.

Embracing the future

This is not the first time that the government in South Korea has been pushed by politicians and prominent organizations to ramp-up the effort to regulate the space. For two weeks in early July, the South Korean National Assembly saw a maelstrom of political parties submit draft bills to create clarifications on initial coin offerings (ICOs), cryptocurrencies and blockchain technology.

In late July, the head of the virtual currency response team for the country’s Financial Services Commission made calls for adequate legal frameworks to be implemented; this would be in order to protect cryptocurrency investors and domestic blockchain enterprises.

Recent changes to tax rules for “new-growth technologies” included tax cuts for companies engaging in blockchain and cryptocurrencies. The new rules were announced in mid-July, however, there is a chance that these benefits will not be extended to cryptocurrency exchanges.


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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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South Korea’s National Assembly Proposes to Lift ICO Ban

South Korea’s National Assembly has made official proposals to allow for domestic initial coin offerings (ICOs) to be legalized, roughly eight months after the country banned all ICOs in September 2017.

South Korea has proven itself it be a fertile land for blockchain and cryptocurrency adoption; it is home to some of the largest exchanges in the world as well as the progressive visions for blockchain technologies to become a mainstay in South Korea’s capital city.

However, since the September 2017 ban, the country’s government has been sweeping the issue of ICOs under the carpet, but it is apparent that now that such significant advances have been made, it is about time the topic of ICOs comes to the forefront.

Ongoing developments

In early May, Bitcoin News reported that key governmental figures were banding together to draft a bill to lift the ban. A particular reason for the move was due to the fact that South Korean companies are raising their funds overseas in friendlier jurisdictions such as Switzerland and Singapore; it is not only costly for the companies themselves but also presents risks to investors who may fall victim to scam ICOs impersonating leading companies.

According to a report by Business Korea on 29 May , the special committee on the fourth industrial revolution went as far as to accuse the government of “neglecting its duty” in its slow response to the expansion of the blockchain industry.

The committee is also calling for a task force made up of both public officials and private experts to “improve transparency of cryptocurrency trading and establish a healthy trade order”.

Ban reversal

Business Korea also reports that the special committee on the fourth industrial revolution also said, “We need to form a task force including private experts in order to improve transparency of cryptocurrency trading and establish a healthy trade order”.

It continued, “The administration also needs to consider setting up a new committee and building governance systems at its level in a bid to systematically make blockchain policy and efficiently provide industrial support. We will also establish a legal basis for cryptocurrency trading, including permission of ICOs, through the National Assembly Standing Committee.”

The timely news arrives as proactive stances on regulation, and taxation frameworks in South Korea begin to set standards for the rest of the world. Additionally, the Business Korea report suggests that now discussions on blockchain and ICOs between the National Assembly and government will “accelerate”, which spells great news for domestic blockchain and cryptocurrency startups, not to mention the entire global industry.


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South Korean Government to Review and ‘Soften’ Cryptocurrency Policies to Meet G20 “Unified Regulation” Proposal

The South Korean government is said to be revising its cryptocurrency policies after the Buenos Ares G20 Summit agreed to create a set of “unified regulations” in light of acknowledging that cryptocurrencies are “financial assets”.

In late March, the G20’s Finance Ministers and Central Bank Governors released a communique noting that crypto-assets have “the potential to improve the efficiency and inclusiveness of the financial system and the economy more broadly”. It also points out that crypto-assets are not without risks, noting “consumer and investor protection, market integrity, tax evasion, money laundering and terrorist financing” as significant issues.

Significant Moves in South Korea
Since late 2017, South Korea has been churning out controversial and conflictingly positive headlines, from bans on initial coin offerings (ICOs) to proposing a cashless society and a cryptocurrency for its capital city.

As we enter the second half of 2018, the supposedly skeptical nation has proven itself to be a valuable ally to blockchain innovations and is now moving ahead to have its policies fall in line with those proposed by the G20.

According to The Korea Times, G20 financial policymakers have set July deadline for the proposed “unified regulations” and that it doesn’t recognize cryptocurrencies as a threat to financial markets as they are “too small to jeopardize it”. Which may be due to the total market value of cryptocurrencies being less than 1 percent of global GDP.

“Non-Financial Products”
The local news outlet also identifies that the present “non-financial product or asset” classification of cryptocurrencies in South Korea is at odds with the G20 assessment of digital currencies.

Whilst it may be a tricky issue for the countries regulators due to their current stance, it appears as though this won’t be enough to stifle efforts; The South Korean Financial Supervisory (FSS) said:

“It’s almost certain that cryptocurrencies will be classified as assets and the main issue will be centered on how to regulate them properly under the unified frame that will be agreed upon between G-20 nations. Given the current stance, this isn’t good, but we will step up efforts to improve things,”.

Building Blocks to a Crypto-Future
As mentioned before, South Korea has been piecing together some very significant parts of the blockchain/cryptocurrency regulation puzzle; in early May the new FSS Governor Yoon Suk-heun revealed his positive outlook on cryptocurrencies, stating that “There are a lot of issues that need to be addressed and reviewed. We can figure them out but gradually.”

The countries National Tax Agency has also been working with the finance ministry to collect and study taxation data collected from exchange operators; cryptocurrency trading is not legally recognized, and therefore only operators have to pay income taxes.

Furthermore, the countries central bank The Bank of Korea (BOK) has a task force studying the possibility of a central bank digital currency (CBDC). Additionally, the BOK had confirmed it was considering blockchain and cryptocurrencies as part of the “cashless society” project.

“The BOK’s recommendation regarding cryptocurrencies will be released by the end of June, at the earliest,” a BOK official said on May 14.

Bearing in mind that South Korea is the third largest fiat to crypto trading block in the world, it should come as no surprise that the country is steaming ahead with positive and evolving regulation attitudes.

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South Korean Financial Watchdog to Investigate Banks Under New Crypto Rules

The South Korean Financial Services Commission (FSC) will inspect three of its banks to see if they are conforming to new anti-anonymity regulations.

In January, the financial watchdog announced that cryptocurrency investors in South Korea would have to use their real-name bank accounts in order to be able to deposit funds. The new regulation intended to remove multiple trading accounts on domestic cryptocurrency exchanges and to strengthen positive views of cryptocurrency trading by tackling money laundering.

Proactive efforts

In a statement, it announced: “We have already executed sufficient procedures for confirming the identity of a member when receiving a new member via a corporate account and it is against equity to allow only a few exchanges to issue new virtual accounts.”

FSC and the Financial Intelligence Unit will begin on-site inspections on three banks – NongHyup, KB Kookmin and KEB Hana Bank – from 19 to 25 April.

The inspection will focus on whether or not the three banks have managed to implement the new rules successfully. If so, it is hoped that this will contribute toward South Korea’s progressive approach to cryptocurrency and blockchain technologies.

Financial regulators and banks aren’t the only entities with blockchain developments in South Korea; they are part of an industry-wide paradigm shift that is experiencing frequent highs and lows. South Korean cryptocurrency exchanges are now to be taxed under existing policies, while Seoul is pushing to have its own cryptocurrency.

Furthermore, the Fuji News Network (FNN) also announced that the Korean government is setting up full-scale cryptocurrency regulations after local elections on 13 June, just ahead of a planned virtual currency international conference for G20 members on 14 June.

The scramble to regulate

More recently, the United Kingdom’s Financial Conduct Authority (FCA) also announced that it would be working with the Bank of England and the UK Treasury to begin discussions on how to regulate cryptocurrencies.

“People are becoming increasingly aware of cryptocurrencies, such as Bitcoin,” said Nicky Morgan, a Member of Parliament and chair of the Treasury Committee, “but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors.”

In China, similar efforts are also gaining momentum. In March, the Institute of International Finance, part of The Peoples Bank of China (PBOC), gave refreshing insights into the evolving attitudes in the country. In a contrasting report to China’s present stance on cryptocurrencies, exchanges and ICOs, it stated that cryptocurrencies could bear risks against the Chinese Yuan (CNY), but the Institute of International Finance is in favor of establishing a regulatory framework for cryptocurrency on a global scale.

South Korea is a huge proponent in the tide of major financial entities and governments pushing to recognize cryptocurrencies. Despite the current shaky market and past controversies, global approaches to the technology are undergoing profound political changes and 2018 is already proving to be an extraordinary year for positive blockchain advancements.


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