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South Korea and Its Step Towards Regulating Cryptocurrency

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South Korea cryptocurrency

The total value of cryptocurrencies surged past $500 billion last Wednesday for the first time ever. Exponential growth in bitcoin’s trading volume has attracted people without finance or IT backgrounds to the cryptocurrency, creating huge demand for the alternative asset class. South Korea has emerged as a major player in this space, with local residents becoming engrossed in the mobile-app based trading platforms in the hope of earning quick profits. In doing so, they have ignored the warnings issued by the government. South Korea currently ranks the third in bitcoin trading, after Japan and the U.S. According to a recent MIT Technology Review report,  South Korean-based Bithumb and Coinone are among the top 15 global digital currency exchanges.

South Korea feels that the wild wave of cryptocurrency should be reigned in and is at present looking forward to regulating the domestic exchanges. It is believed that more than one million registered users trade the virtual currencies daily. That’s equivalent to about one out of every citizen, giving the federal government plenty of reason to worry.

ICO Ban and Tax Regulation

The Financial Services Commission (FSC) of South Korea had banned initial coin offerings (ICOs) in September, but the ban was quickly lifted on the condition that the market will still be subject to strict regulations. The country’s Financial Supervisory Service (FSS) first announced in November 2017 that the agency is examining cryptocurrency trading within the country. Moreover, the National Tax Agency is in the process of introducing a Value Added Tax or a capital gains tax or both  on cryptocurrency trades. South Korea will join the small group of countries that have introduced a tax on cryptocurrency-to-cash exchanges.

Another concern for the South Korean government is the increasing risk of cyber attacks from North Korea. The target of the totalitarian government of North Korea is to convert bitcoin and other cryptocurrencies into U.S. dollars , giving them plenty of profits. This is the main reason for the regime led by Kim Jong-un to hack the cryptocurrency exchanges that are based in rival countries. The National Police Agency of South Korea claims that their unfriendly neighbor may be specifically targeting domestic bitcoin exchanges. On implementation of these regulatory measures, North Korean banks will not be able to open cryptocurrency accounts for minors. Neither will they be able to open such a bank account without proper identity verification. It has been reported that the Korea Development Bank and Woori Bank are going to close all virtual accounts offered to the crypto exchanges by the end of 2017.

To handle cyber attacks, especially from their neighboring country, the regulatory bodies of South Korea are pressurizing the cryptocurrency exchanges to fortify storage security of the encryption keys, verify the real names of the users, and disclose Buy and order volumes.

“A virtual currency exchange, which has more than 10 billion won in sales such as Bithumb, Coinone and Korbit, or more than 1 million visitors per day, is expected to receive the government’s ‘Information Security Management System (ISMS)’ certification next year.” Hankyung publication.

 

Conditions South Korean Crypto Exchanges Must follow to Operate Legally

The following list represents the conditions South Korean exchanges must follow to operate legally in the country:

  • The cryptocurrency exchanges must store their customers’ funds separately.
  • There should be a healthy dose of warning regarding trading crypto assets. The exchanges should thoroughly explain investment risks to their clients.
  • They should ask for documents that will verify their real name and residential address.
  • The cryptocurrency exchanges should employ an asset protection system like the dispersion of cryptographic keys. They should also implement a strict anti-money laundering system.
  • The transaction details should be accessible to the public for a more transparent system.
  • The exchanges should increase penalties in case there is any indication of malpractices.

Impact of South Korean Emergency Measures

The following represents the impact of South Korea’s emergency measures on the nation’s existing crypto regulations:

  • The emergency measures for regulations taken by South Korea will most certainly solve some of the security issues and is also expected to reduce the threat of cyber attacks.
  • Minors will no longer be able to trade cryptocurrencies through the exchanges of South Korea.
  • Under this regulation, the profits made through trading crypto assets will also be liable to taxation.
  • Following up on the previous point, anyone trading through Bithumb, Coinone or other South Korean cryptocurrency exchanges will have to pay the taxes. The government hopes that it will check overtrading of cryptocurrencies.
  • The measures will thus decrease profit volume.
  • Foreigners who are not residing in South Korea will not be able to trade cryptocurrencies through South Korean exchanges. Other countries will not have access to the crypto assets offered by South Korean crypto exchanges.
  • Traders who already own cryptocurrencies will not be conduct additional trades.

Thus, the regulations and tax policies about to be implemented by the South Korean government regarding cryptocurrency trading will have surreptitious advantages for its citizens. They will have a more secure trading experience. The downside is that their profit volume will decrease compared to the cryptocurrency traders from other countries. Another disadvantage is foreign investors will not be able to trade cryptocurrencies through South Korean exchanges. The step taken by the legal bodies of South Korea is an attempt to regulate the tide of crypto coins and to prevent phishing attacks.

Featured image courtesy of Shutterstock. 

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 9 rated postsHira Saeed is a tech geek girl with a passion to write on latest technology trends. She is the Founder of Tech Geeks community in Pakistan and also runs her copywriting and social media agency, Digital Doers. Follow her on @heerasaeed.




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Vanuatu Joins List of Countries Issuing Crypto Licenses

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The country of Vanuatu approved and delivered a ‘stock exchange license’ to a cryptocurrency exchange for the first time ever, according to reports coming from the platform in question.

DSTOQ (which launched yesterday, along with a ‘tester’ MVP) announced the public reveal of their project along with the claim of being “the first fully licensed stock exchange for trading security tokens and investing in real-world assets using cryptocurrencies.”

Due to being a member of the Commonwealth of Nations, the license as obtained by DSTOQ will only be viable at present in European territories primarily, rather than the USA.

Vanatu: What, Where and Why?

The Republic of Vanuatu is a nation of islands located in the South Pacific ocean, and one that made crypto headlines earlier this year, when it was mistakenly reported that the modest population’s government would be patriating new citizens in exchange for a “$200,000” Bitcoin payment. Claims which the country’s citizenship office vehemently denied.

This wouldn’t be the first time the Vanuatu had caught the eyes of the financial press, as the country was listed by Forbes as being amongst “The tax havens hidden in plain sight” where the writer noted that banking organisations as large as “ANZ and Westpac have offices” in the country.

Countries for Crypto

Other countries that have been considered ‘tax havens’ by Western pundits (and members of their own national press outlets), such as Taiwan and Singapore have been noted for their particular leniency towards if not acceptance and support of cryptocurrencies.

The recent news coming out of Vanuatu suggests that they may be the latest to join a growing number of nations which could alternately be referred to as ‘Crypto Havens’, with regards to regulation and enforcement.

These nations skirt the traditional barriers to entry which face many potential investors as well as companies. A strong example of this can be seen with Hong Kong, which has relatively lax laws covering the mining and trade of cryptocurrencies in comparison to neighboring China – which has implemented almost-blanket bans.

In European mainland, Estonia has also proven itself to be a clear proponent for licensing with regards to cryptocurrency – with the country’s government going as far as to issue wallet and exchange licenses to organisations which it deems fit.

What Does This Mean?

It’s promising to see a diverse range and geographical dispersion of countries officially on-boarding cryptocurrency into their nations’ governmental economic and cultural strategies for the future, however it is also telling that all of the most enthusiastic proponents of the technology are isolated entities. Singapore, Taiwan, and Hong Kong for example, are nation-states – despite many of them having close cultural and ethnic ties with their neighbouring nations; Vanuatu is a multitude of islands separated from the world by sea; and even Estonia is mostly surrounded by water, with its vast collection of peninsulas.

This physical distance from other countries is somewhat representative, however, of their political distance from the rest of the world – as well as that of their influence. Until the trend starts spreading further, to countries with greater sway and presence on the global stage.

In this light, it’s worth taking a look at how the Financial Conduct Authority in the United Kingdom is approaching cryptocurrency, a country with a long and seminal role in both historical and modern financial markets. The agency has called for a world-wide “effort to speed up fin-tech growth” and utilised its relations with other countries in an attempt to establish a global regulatory “sandbox” with the aspiration of speeding up or mitigating the formal approval processes.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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“We should prohibit U.S. persons from buying or mining cryptocurrencies,” says Rep. Brad Sherman

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A Congressional Financial Services Committee meeting today turned alarmingly hostile to cryptocurrencies and blockchain technology as a whole.

This hostility stemmed initially from Democratic Representative Brad Sherman, who stated,”We should prohibit U.S. persons from buying or mining cryptocurrencies.”

According to a senior political journalist from Politico in attendance at the meeting, Rep. Sherman believed that mining is so exceptionally energy intensive and that it’s so much much more environmentally damaging than it’s potential utility is worth and thus, that the government should ban it to eliminate the possibility of further destruction.

Importantly, but likely not coincidentally, is the fact that Rep. Sherman’s biggest campaign contributor was a credit card processing company.

The company is Ally Wallet, which describes itself as, “The preferred online merchant services company and online global payment gateway solution for businesses that need to accept online payments.”

Unfortunately, Rep. Sherman’s utterances were not the only anti-cryptocurrency statements at the hearing. Specifically, Alex Pollock, a fellow from the Pro-Free Market think R Street Institute, stated his view that, “a central bank virtual currency is one of the worst ideas in recent times.”

When this is combined with Fed Chairman Jerome Powell’s comments earlier this week that, “a Fed-backed cryptocurrency is not something we’re looking at”, it paints a picture of a government increasingly alarmed by the growing use of cryptocurrencies in general.

Chairman Powell, also raised an issue with Bitcoin’s use in money laundering and other financial fraud. He elaborated further by stating that “there are too few places taking crypto as payment and the value is too volatile to be a stable store of value. Cryptocurrencies undermine the U.S. sanctions regime against terrorists/adversaries.” Powell concluded when pressed that he saw, “more risks and concerns in cryptocurrency than in its potential use.”

Additionally, at the same meeting, Representative Ryan Peterson stated that “I’m someone who believes we should still be on the gold standard and I think we need to audit the Fed because I don’t trust them.” Rep. Peterson also allegedly stated his belief at the meeting that, “digital currencies are Ponzi schemes.”

It is somewhat alarming in the opinion of this analyst that an ignorant consensus seems to be forming in the upper echelons of government that views cryptocurrency as inherently a threat to their power, and that as a result it must be stopped.

Luckily, there was some pushback from a representative of “Bitcoin University”, albeit after the meeting. This individual confronted Rep. Andy Barr, who is a Financial Services Committee member, and exclaimed that “he needed to bring more Bitcoin experts into the next hearing.”

Whether these combined statements is ultimately reflective of a US federal policy shift remains to be seen. But for proponents of Bitcoin and cryptocurrency, they serve as a reminder that those in positions of power will not lose their status without a fight.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Government of Malta Passes New Cryptocurrency Legislation

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Malta’s embrace of digital currency came full circle Tuesday after lawmakers passed three separate crypto-related bills that could transform the island nation into a blockchain powerhouse.

‘First in the World’

CCN broke the news Wednesday that all three bills have gone through Malta’s legislative process, putting them on track for full implementation. The second reading of the bills was carried out Tuesday night in a plenary session that began at 6:00 p.m. local time, parliamentary records show.

The approved bills include the Virtual Financial Assets Act (VFA),  the Innovative Technology Arrangements and Services Act and  the Malta Digital Innovation Authority Act (MDIA).

VFA deals specifically with the regulation of initial coin offerings (ICOs), ordering new token projects to publish whitepapers and detailed descriptions of the entire project.

The  Innovative Technology Arrangements and Services bill governs blockchain startups and other businesses looking to leverage distributed ledger technology.

MDIA will effectively serve as an industry-specific governing body that will support the development and implementation of blockchain-based regulations.

Parliamentary Secretary Silvio Schembri said the bills were a ‘first in the world’ development and also announced the person heading the newly created MDIA:

“Today Maltese Parliament unanimously approved 3 bills on DLT/blockchain, a 1st in the World. Honored to have driven these bills. Announced that Mr Stephen McCarthy will be the CEO of the new #Malta Digital Innovation Authority.”

Blockchain Island

Malta has quickly emerged as a prominent player in the blockchain industry, having already lured major exchanges and businesses to its borders. Binance has announced plans to relocate to the tiny Mediterranean nation and earlier this month disclosed that it has opened a bank account in the country. OKEx, another prominent exchange, has also announced plans to make Malta its new home.

Binance and OKEx are the world’s largest cryptocurrency exchanges by trading volume, each processing more than $950 million in daily transactions.

Binance’s decision to relocate was largely driven by its desire to enable fiat-to-crypto deposits and withdrawals, something Malta says it will accommodate through local bank partnerships.

Changpeng Zhao, Binance’s CEO, has described Malta’s regulatory stance toward blockchain and cryptocurrency as “logical, clear and forward-thinking,” adding that “dozens” of similar exchanges are planning to relocate to the country.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 603 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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