As bitcoin and digital currencies grow in popularity in South Korea, financial regulators have launched a digital currency task force to focus on regulatory and licensing parameters for bitcoin exchanges.
In a meeting last week, the first of many over the coming months, the task force agreed that the bitcoin and digital currency sector needs to be regulated, according to regional publication Korea Joongang Daily.
The Financial Services Commission (FSC) convened the meeting, besides launching the task force, and saw other authorities including the Bank of Korea, the country’s central bank, the Ministry of Strategy and Finance, and the Financial Supervisory Service. As things stand, the Ministry of Science, ICT and Future Planning is tasked to oversee the registration of bitcoin exchanges without any regulatory guidelines. The current structure is likely to change by Q1 2017.
As for the regulatory approach itself, the taskforce will refer to existing legal frameworks in the United States – New York state’s BitLicense is a notable example – and Japan, where a recent bill was passed by the legislature to regulate bitcoin exchanges in the country.
The templates for bitcoin regulations were first revealed in a speech by FSC chairman Yim Jong-Yong last month, who stated:
The government will push for the systemization of digital currency on a full scale in tandem with a global trend in the U.S., Japan and other countries.
Bitcoin adoption has seen significant strides in the country, with a total of 1.5 trillion won (approx. $1.3 billion) in transactions processed between the top three bitcoin exchanges alone. Other data revealed by the FSC notes a 6% rise in average monthly bitcoin transactions compared to last year.
The need for regulation will also see stringent measures to prevent misuse of digital currencies through exchanges, according to the commission, which said during the meeting:
Digital currency is often used for money laundering, drug trafficking and tax-related crimes since it is free from regulation.
The increased activity from regulators and officials coincides with developments in the South Korean fintech space in recent months. For instance, the Korea Exchange, South Korea’s sole securities operator launched a blockchain-based market for private companies and startups to trade shares. Shinhan Bank, a major financial institution in the country, announced a new bitcoin-based remittance service that will serve the Korea-China corridor, highlighting a notable instance where a traditional bank is tapping into the innovation of bitcoin.
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