South Korea is the world’s third biggest crypto market, making it a major player just behind the US and Japan.
Accounting for about 10% of the global crypto trade, the country is so important that when news first came about a possible South Korea crypto ban in 2018, BTC prices fell by $2,000 or about 30%.
The government soon clarified on the matter and implemented a ban on anonymous trading instead, among several other trading regulations. Once again in mid-2021, Seoul has imposed tough new regulations to regulate and supervise the powerful wave of cryptocurrency trading and investment in Korea.
South Korea’s History of Crypto Trading and Regulation
The crypto trading boom in South Korea exploded as Bitcoin and other cryptocurrencies became more popular. It is known that cryptos can trade at premiums of 30% or more on local exchanges in the country, fuelled by factors of supply and demand.
South Korea has many advantages that allow it to be a hotspot of crypto trading. It has one of the world’s fastest internet connections, a large population of educated and savvy youth, and many cultural factors surrounding wealth and work.
Unfortunately, the country also has more reasons than most to be wary of crypto trading. For one, the presence of North Korea has been a dark cloud in the face of crypto. Earlier this year, the US Justice Department unsealed an indictment against North Korea’s military intelligence for cryptocurrency hacks amounting to over $1.7 billion AUD.
Secondly, the South Korean government is now looking to cash in on possible gains from crypto trading and investment. Far from an impending South Korea ban on crypto, the country has been imposing strict regulations on the industry.
Trading Regulations Imposed in 2018
Legislation implemented in 2018 imposed a number of regulations on cryptocurrency trading in the country. These include:
- A ban on anonymous crypto trading. All bank accounts linked with crypto transactions would need to have their identities confirmed.
- Crypto exchanges would have to register with the Financial Intelligence Unit and comply with various requirements such as anti-money laundering (AML) and Know Your Customer (KYC) requirements.
- All foreign and underage investors were banned from crypto trading in the country.
- Employees and executives of crypto exchanges were banned from trading on their own platforms.
Now, South Korea Has Banned Cross-Trading
While South Korea is yet to ban crypto trading outright, it continues to tighten regulations on cryptocurrency trading in the country. In June, Cointelegraph reported that the country has banned cross-trading among crypto exchanges.
Cross trading is already illegal in other jurisdictions, but it comes amid a raft of other amendments to the law. The others include:
- All crypto-related businesses, including exchanges, wallet providers, and asset managers, are to file transaction records with the Financial Intelligence Unit (FIU).
- All crypto service providers are to have robust customer identification protocols.
- On the same note, crypto service providers are to flag and report any suspicious transactions to the FIU.
- As of January 2022, Capital Gains Tax will be imposed on trading profits in excess of about $3118 AUD (2.5 million won).
- New crypto exchanges in the country will have to abide by a long string of laws and regulations before they can be licenced by the FIU.
Conclusion
Seoul has always confessed to be one step away from banning cryptocurrency trading outright. That hasn’t happened yet, probably because of the many benefits that crypto and blockchain technology can afford an economy like South Korea’s.
Meanwhile, the Korean government continues to impose increasingly stringent regulatory measures on crypto trading. Given how important South Korea is on the global crypto scene, we will continue watching closely to see how it plays out.
While at it, we will also be watching North Korea as well.
