South Korea Seeks Measures to Curb Bitcoin Frenzy

Updated on
  • Government proposes laws to regulate cryptocurrency exchanges
  • Korea premium is down to about 3% from about 30% last week

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South Korea will restrictively allow cryptocurrency trading on only qualified exchanges and review a possible capital gains tax on crypto trading as a way to restrain the nation’s frenzied speculation.

The government will propose measures that will conditionally allow cryptocurrency trading on exchanges that uphold investor protection and trade transparency while prohibiting trading by financial institutions, minors and non-residents, according to a statement from the Office for Government Policy Coordination. The policy makers will also form a task force to review a levy and seek “balanced” policies that won’t hurt block chain technology, it said.

Monthly cryptocurrency trading volume on South Korea’s largest exchange Bithumb surged to 56 trillion won ($51 billion) in November from 305 billion won in January, according to the exchange with about 1.5 million users. Korea’s crypto craze has calmed down somewhat this week amid the government’s efforts to boost supervision. Bitcoin is trading at about a 3 percent premium over prevailing international rates on Wednesday in Seoul after the premium surged to about 30 percent last week.

Read more: Bitcoin Frenzy Like No Other Has Koreans Paying 23% Premium

Exchanges that want to operate business would need to meet certain conditions including depositing customer funds separately, verifying customer name and disclosing bid-ask price and trading volumes, according to the statement.

Separately, Woori Bank and Korea Development Bank will shut down virtual accounts offered to cryptocurrency exchanges before year-end, according to the banks.

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