SEOUL -- The South Korean Ministry of Justice is considering imposing a total ban on trading in bitcoin, other cryptocurrencies and digital tokens in order to protect individuals from potential scams, a ministry official told the Nikkei Asian Review on Dec. 11.
While the finance ministry and some legislators are likely to oppose the justice ministry's move, the discussion itself reflects a growing trend among Asian governments toward tighter controls on the use of cryptocurrencies.
"We do not rule out an option that bans trading of [all] cryptocurrencies," said Prosecutor Choi Jin-seok, who is in charge of cryptocurrency-related crimes at the ministry, on Dec. 11. "We acknowledge many problems stemming from the trade and are studying how to control them."
The ministry's move came as bitcoin futures debuted Dec. 10 at the Chicago Board Options Exchange, adding a hedging vehicle for the digital currency. The rival CME Group also plans to start trading bitcoin futures on Dec. 18.
The CBOE Bitcoin futures contract expiring in January was traded at $18,590 on Monday morning, up from $15,000 on Sunday afternoon, according to CBOE Global Markets.
The average exchange rate of one bitcoin to the U.S. dollar has soared from below $1,000 at the beginning of 2017 to top $16,000 in December, according to U.S. cryptocurrency information site CoinDesk. The market capitalization of bitcoin has also exceeded that of big global companies such as Visa and Coca-Cola.
The turn in the tide against cryptocurrency trading was exemplified most dramatically by Chinese financial regulators including the People's Bank of China in September, when they banned all centralized-auction exchanges for cryptocurrency and digital tokens. Today Chinese residents are only allowed to trade their bitcoins and other cryptocurrencies via peer-to-peer deals.
In late October the Vietnam government declared that bitcoin and other cryptocurrencies were "not legal methods of payment" inside the country. Any trade in them will be subject to fines starting from Jan. 1, 2018.
On Dec. 7, Bank Indonesia, the central bank, announced that the use of cryptocurrencies for payment would be prohibited inside that country from Jan. 1, 2018. The new ban is in addition to existing heavy restrictions on the use of foreign currencies for domestic commercial transactions.
The South Korean ministry had announced in a press release earlier in December that it planned to announce new measures to control cryptocurrencies by the end of this month. It had also vowed to crack down on crimes involving cryptocurrencies and digital tokens, with ordinary people vulnerable to exploitation and being lured to put money into schemes that offer false promises of low risk and high returns.
Two sides of the same coin
South Koreans are believed to have been a major driving force behind the continuous bitcoin price surge, together with the Japanese, after China banned domestic cryptocurrency exchanges. According to Nikkei estimates, the share of Japanese yen in global bitcoin transactions reached 42% in October, surpassing the U.S. dollar at 36%. The share of Korean won is close to 20%, while that of the Chinese yuan is nearly zero.
The share of yuan was once above 90% in 2016.
The South Korean justice ministry's plan, however, will almost certainly face opposition inside the government.
Finance Minister Kim Dong-yeon has mentioned cryptocurrencies as an example of growth-engine technologies. "Those [technologies] are big revenue sources in the future, such as autonomous driving, drones and cryptocurrency," said Kim at a lunch meeting with reporters in late November.
Lawmakers are also urging the government to find ways to nurture blockchain, or distributed ledger, technology, which is the basis of cryptocurrencies including bitcoin. It is also increasingly believed that it will become a basis of future banking and inter-bank-settlement infrastructure and smart contracts, where contract implementation can be fully automated.
Rep. Choo Kyung-ho of the Liberty Korea Party, who previously worked in the country's financial authorities, hosted a conference on cryptocurrency last month, at which experts discussed ways to find solutions for developing the cryptocurrency market, while minimizing side effects.
"Blockchain technology can be applied to a wide range of fields in the fourth industrial revolution. We need to find out ways to adopt this new technology quickly as many other countries are rushing to develop this technology," said the legislator during the conference.
It is also unclear on which laws the justice ministry will base its crackdown on cryptocurrencies. Sources at the ministry have told the Nikkei Asian Review that many prosecutors are leaning towards considering cryptocurrencies themselves as a scam because they are not backed by any monetary authority, real assets or cash flow. If they are categorized as a scam, then the ministry can simply apply the existing criminal code.
Whichever methodology the justice ministry adopts, there will likely be fierce debate between itself, the finance ministry and the Bank of Korea regarding which body has the authority to govern cryptocurrencies and the like.
In Asia, Japan leads in building a regulatory framework for the cryptocurrency market. In April, its revised fund settlement laws took effect, with bitcoin and other cryptocurrencies being recognized as payment methods. The new law also meant that cryptocurrency exchanges and their listed currencies and tokens had to be registered with the country's Financial Services Agency.
Nikkei Asian Review Editor-at-large Ken Koyanagi in Bangkok contributed to this story.