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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.

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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.

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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. 

 

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Shares of Hong Kong-Based UBI Blockchain Suspended by SEC

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The Securities and Exchange Commission (SEC) has halted trading in UBI Blockchain Internet Ltd. (UBIA) over “unexplained market activity,” a sign that regulators were continuing to clamp down on assets tied to cryptocurrency.

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Trading Halted

The U.S. securities regulator announced Monday that it was suspending UBI Blockchain shares from being traded until the company answers questions about the accuracy of its financial statements.

UBI Blockchain surged more than 900% last year, bringing its total market value north of $800 million. All this, and the company has yet post any revenue. It also failed to give regulators a working phone number during public filing.

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Company chief Tony Liu said the SEC’s decision is “understandable  due to the recent frenzy of buying stock related to the bitcoin phenomena.” However, Liu reminded that his company was not involved in cryptocurrency.

“We believe the general public is confusing our blockchain technology with bitcoin companies,” Liu said in a statement that was quoted by Bloomberg. UBI was “involved in blockchain technology for well over two years before the bitcoin buying frenzy took place and we plan to be in business for years after the bitcoin buying anomaly ends.”

Blockchain is the pioneering technology that underlies bitcoin and other cryptocurrencies, but can exist independently of those systems. Its vast use case has attracted attention from banks, governments and businesses in pursuit of more transparent audit trails.

The Rise of Crypto Stocks

So-called ‘crypto stocks’ have benefited from the euphoria surrounding digital currencies. Their popularity has grown in lockstep with bitcoin among investors who want to capitalize on the crypto revolution without the added volatility of owning the underlying assets.

There’s a long list of companies that can offer indirect exposure to cryptocurrency. Some of the more popular include AMD (AMD) and Nvidia (NVDA), whose chips are used for mining virtual currency.

Digital Power (DPW) is a manufacturer of power-supply products that is venturing into cryptocurrency-specific equipment. Meanwhile, Overstock.com is an online retailer that not only accepts bitcoin, but is launching a mega ICO through its subsidiary tZero.

In addition to stocks, traditional investors can choose from Grayscale’s Bitcoin Investment Trust (GBTC), which holds BTC tokens in a fund that is similar to an ETF, as well as futures contracts offered by CME and CBOE. Efforts to bring bitcoin to the ETF market are also ongoing.

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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Notable Market Prognosticator Jeremy Grantham Considers Bitcoin to Be a “Bubble”

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The investor who accurately predicted two major market crashes has described bitcoin a “bubble” that is waiting to burst. Although bitcoin enthusiasts have heard this song before, it carries a little more weight coming from from Jeremy Grantham, the co-founder of GMO.

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Bitcoin has No Fundamental Value

Grantham, who famously called the dot-com and sub-prime mortgage crashes, said the bitcoin bubble is likely to burst within the next six months to two years.

In his regular report on market trends, he said bitcoin has “no clear fundamental value” and operates in “largely unregulated markets.” This is combined with “a storyline conducive to delusions of grandeur” that makes bitcoin the very thing that investors fear.

In his analysis, Grantham compares bitcoin’s meteoric rise to the the dot-com era around 1999 and early 2000. This is exemplified in the following graph, which charts bitcoin’s meteoric climb against several of history’s biggest bubbles.

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In fact, bitcoin’s rise is so steep that it dwarfs the South Sea Company of the 1700s. In Grantham’s view, the extent of the asset’s growth means the bubble could burst long before the broader market peaks. Based on recent price trends, that peak could be a long ways out.

Bitcoin’s Bull Run

We’ve all read about bitcoin’s meteoric rise over the last 12 months, but much less has been written about its prior performance. The digital asset was actually the world’s best performing currency in six of seven years between 2010 and 2016 before being overtaken by Ripple in 2017.

Bitcoin’s epic rally helped trigger a broader cryptocurrency explosion, resulting in a market now worth more than $750 billion. The total value of all cryptocurrencies peaked around $833 billion on Sunday before correcting lower over the past 20 hours.

As Grantham’s prediction clearly demonstrates, cryptocurrencies have divided market participants and investors about the true nature of its rally. Privacy advocates, technology companies and those weary of big government have described cryptocurrency as a major evolution in how we conceive and transmit monetary value. Government agencies, institutional investors and Wall Street have been much more critical, going as far as describing bitcoin as the tool of cyber criminals.

Though disagreements over cryptocurrency will continue, all these actors more or less share one thing in common: they all support the development of blockchain technology. The immutable ledger has demonstrated utility that extends far beyond the crypto sphere, with banks and even governments experimenting with it.

Whether or not bitcoin is a bubble has less bearing on the argument that cryptocurrencies have revolutionized the financial system. There are more than 1,400 coins in circulation, and many agree that the vast majority will fail. Though a bitcoin crash would have a devastating impact on investors and the market at large, it would not negate the project of decentralized currency. Alas, the viability of bitcoin and other crypto assets does not depend on whether they are in a bubble state or not.

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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U.S. Government to Sell Bitcoin, Bitcoin Cash Seized from Cyber Criminal

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A U.S. federal judge in Utah has approved the auction of hundreds of units of bitcoin and bitcoin cash seized from a dark web dealer, CCN has learned. The sale will be part of a larger liquidation of assets belonging to convicted criminal Aaron Michael Shamo.

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Bitcoin Auction

There were 513 units of bitcoin and 512 bitcoin cash tokens in Shamo’s possession at the time of his conviction. All of them will be auctioned off, along with two automobiles. At current prices, the sale will amount to roughly $8.5 million.

Shamo was convicted on May 31, 2017 along with fellow dark web operators for several drug-related offences, including trafficking and conspiracy to commit money laundering.

The official court document released by Utah district judge Dale Kimball indicated that it was too costly to store the seized cryptocurrencies for a prolonged period. Based on the court documents, storing the coins cost taxpayers $465 per month.

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The decision to liquidate the coins comes amid growing concerns over price volatility, with government officials seeking an imminent sale of the cryptocurrencies before they lose their value.  In October it was disclosed that the U.S. government lost nearly $2.4 billion on the sale of 144,336 bitcoins when the cryptocurrency was priced at just $336 a unit.

According to the official court document:

“The vehicles [bitcoin and Bitcoin Cash] have been seized and are in the custody and control of the United States Marshals Service. Every month, the USMS is accruing $465/month in storage fees for these vehicles. The total expenses for these two vehicles currently is $5,010.70. The BTC and BCH have been transferred to a Government wallet. Due to the volatile market for cryptocurrencies, the BTC and BCH risk losing value during the pendency of the forfeiture proceedings.”

Once considered the exclusive domain of dark web criminality, bitcoin has catapulted into the mainstream over the last 12 months. The price explosion has drawn the attention of various levels of government, from the Securities and Exchange Commission (SEC) to the District Court system.

Although bitcoin remains a popular cryptocurrency in the criminal underworld, altcoins with stronger privacy features are gaining prominence. Coins such as Monero, Zcash and Ethereum are becoming more popular among cyber criminals. Zcash appears to have the best privacy protection among the three, which analysts say could generate higher adoption among criminals in the future.

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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