Smoke Gets in Your Eyes

Bitcoin Gets High in Korea

Taxation equals legitimization, and legitimization means government support.
Photographer: baloon111/Getty Images

If you can't beat them, regulate them.

That sounds like a pretty good mantra for governments the world over trying to wrap their heads around this tamagotchi of finance better known as bitcoin.

South Korea is the latest to propose cryptocurrency measures after a surge in trading started to ring alarm bells. The fact that its citizens were paying close to 30 percent more than foreign counterparts for bitcoin may have been a catalyst for action. So too was the emergence of a South Korean exchange, Bithumb, as the world's second-largest trading platform.

Who Won?

South Korea's Bithumb, which trades the won-bitcoin pair, has become the second-largest bitcoin market by volume

Source: CoinMarketCap

Note: Data as of 12:10pm Seoul time Dec. 14, 2017.

Rather than viewing this as a crackdown, Seoul's interest in the crypto markets ought to be considered a tacit blessing.

Among the measures being proposed are investor-protection mechanisms including the requirement to disclose bid-ask spreads and trading volumes. Bans on trading by financial institutions, minors, and foreigners are also on the table, Bloomberg's Kyungji Cho reported Wednesday.

I've touched on the issue of regulation and acceptance before, with plenty of backlash from the anarchist crowd. So I expect a flood of hate mail when I suggest that taxing cryptocurrencies could be a good thing for this new financial vehicle. (Come on libertarians, don't disappoint me).

That's because taxation equals legitimization, and legitimization means government support. That in turn means wider acceptance.

If you're an anti-government, freedom-loving libertarian who doesn't like my thesis then ask yourself whether you're in favor of the legalization of marijuana. Right, thought so. One of the biggest arguments made by 420 friends is that making pot legal means that it can be regulated and taxed, helping the weed economy to move out of the shadows and away from organized crime. Criminalization wasn't doing much to stop it anyway.

Not So Bright

The launch of bitcoin futures on Cboe added fresh excitement to the market, but failed to drive bitcoin prices higher

Source: Bloomberg

Weed isn't bitcoin. There's yet to be a medicinal use for the cryptocurrency, although it has helped many people get high. But the main concepts still apply.

We already know that legalization and government legitimacy aren't a requirement for cryptocurrencies to become hot. Many of the countries that have had crackdowns on bitcoin also saw spikes in trading. But the fact that weed is already widespread hasn't been a very strong argument against legalization.

I'm going to go out on a limb and say that smoking marijuana is far more widespread than trading bitcoin (no, I do not have any evidence, nor do I condone smoking pot).

So maybe South Korea's move is the right one, and more governments should follow. Shouldn't bitcoin have a chance to enjoy the same high?

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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    Tim Culpan in Taipei at

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