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South Korea Not Ruling Out ‘Shutdown’ of Bitcoin Exchanges in the Future: Govt Official

Last Updated March 4, 2021 5:03 PM
Josiah Wilmoth
Last Updated March 4, 2021 5:03 PM

South Korea is not banning bitcoin, but a top government official says that regulators “will consider” shutting down cryptocurrency exchanges in the future if proposed regulations fail to cool off what they consider to be “irrationally overheated” markets in the country.

South Korea Will ‘Consider’ Shutting Down Bitcoin Exchanges, Says Govt. Official

According to multiple local media reports, Hong Nam-ki, minister of South Korea’s Office for Government Policy Coordination, said that regulators will consider shutting down cryptocurrency exchanges if new measures intended to curb cryptocurrency speculation fail to have the desired effect.

“We are planning to consider every possible measure in the future, including the shutdown of exchanges,” Hong told reporters, according to BusinessKorea, an English-language news service based in Seoul.

A report from fellow Seoul publication The Korea Times  added that Hong said that Korea’s Ministry of Justice had already proposed shutting down cryptocurrency exchanges, although the government has yet to follow-up on this proposal.

As CCN.com has reported, South Korea announced a bevy of new regulations governing cryptocurrency exchanges located in the country. Under the new measures, users will no longer be allowed to trade anonymously, and both minors and foreigners will be barred from creating trading accounts. Moreover, exchanges will be prohibited from allowing traders to open new accounts until name verification policies have been implemented.

The government has also begun conducting onsite inspections of cryptocurrency exchanges, a practice which it began in earnest following the hack of local exchange Youbit and the company’s subsequent bankruptcy filing. According to a statement published following the inspections, regulators deemed the security and management operations of most exchanges to be “inadequate.”

Bitcoin Mania a ‘Pathological Phenomenon’

These measures are intended to cool off Korea’s heated cryptocurrency markets, which often price coins at significant premiums, both due to local demand and the difficulty of international arbitrage. More than three out of 10 Korean office workers have invested in bitcoin, and even middle school students have taken to day trading.

South Korea’s cryptocurrency mania has become so pronounced that even Prime Minister Lee Nak-yon commented on the matter, calling it a “pathological phenomenon” that could enhance criminal activity.

But although regulators have suggested that closing exchanges is a possibility, many traders believe that a blanket shutdown is unlikely, especially considering the immense size of the domestic markets. A more likely scenario is that the government will close individual exchanges for non-compliance with regulatory requirements, a move that could help prevent future hacks and strengthen the markets over the long-term.

Write to Josiah Wilmoth at josiah.wilmoth(at)CCN.com.

Featured image from Shutterstock.