South Korea’s new wave of cryptocurrency regulation
South Korea continues its busy week being at the centre of the cryptoverse, with major banks being unable to escape the spotlight.
The South Korean government’s growing interest in regulating its highly active cryptocurrency market is showing no signs of slowing down. The Financial Intelligence Unit and the Financial Supervisory Service (FSS) are presently carrying out joint inspections of six major banks that provide virtual accounts to multiple cryptocurrency exchanges.
The report by South Korea’s Yonhap news agency names Woori Bank, Kookmin Bank, Shinhan Bank, NongHyup Bank, Industrial Bank of Korea and Korea Development Bank as those being inspected, but does not go into detail about which cryptocurrency exchanges will be affected by the inspection.
The inspections are being carried out this week until Thursday, with authorities investigating whether the six banks carried out their obligations to prevent money laundering in managing virtual accounts. It is reported that of the accounts related to cryptocurrency exchanges, there are 111 with a combined total value estimated at 2 trillion won (US$1.8 billion).
Financial Services Commission (FSC) chairman, Choi Jong-ku, who is involved in the coordination of the probe, has made it explicit that part of the desired outcome is to prevent the possibility of serious “side effects” – which are associated with excessive speculative investments – on consumers.
South Korea’s obsession with cryptocurrency is so significant that when South Korean market data was removed from coinmarketcap yesterday, it appeared to cause a flash crash, which confused many spectators.
South Korea appeals to 23 nations and global financial bodies to work cooperatively to regulate cryptocurrency for the sake of financial stability
South Korea’s tightening grip on cryptocurrency continues internationally as well as at home, with the chairman of the South Korean Financial Supervisory Commission (FSC) Kim Yong-bum making an appeal at the Financial Stability Board (FSB) meeting in Switzerland, where member nations collaborated on regulating cryptocurrencies. The FSB consists of 24 countries, the EU and IMF, and was established in the wake of the 2008 Global Financial Crisis to coordinate financial policy with the aim of increasing global financial stability.
Speaking on the topic of cryptocurrency being used as a means to commit illegal acts (including money laundering) Kim was reported to have called for “international coordination to curb virtual currency trading” as a means of tackling the issue. Money laundering has been a popular accusation levelled at cryptocurrency by South Korean politicians looking to regulate the market.
Kim went on to highlight the unique position that cryptocurrency occupies, sitting outside the reach of many financial frameworks and regulations that nations already have established. In light of this, Kim urged the FSB to investigate the potential risks of cryptocurrency on global financial stability, as well as encouraging member states to share relevant information about the outcomes and effects of each state’s regulations as they are introduced.
South Korea to move forward with a ban on anonymous accounts on cryptocurrency exchanges
In an update to the news that South Korea would be requiring traders to use their real names and bank accounts when trading on South Korean exchanges, Yonhap news agency has reported that “financial industry sources” are saying that the regulations will come into effect on 20 January.
According to the changes, traders will have to match their real-name bank account with their real-name exchange account, with this becoming their only means for depositing and withdrawing fiat currency. The government hopes the move will increase transparency and stifle money laundering.
What does this mean for prices?
South Korea is notorious for propping up the prices of many coins, often dealing with prices that exceed the global average by up to 30%. Let’s look at the price action and volume of some of the top coins being traded with South Korean won over the past 24 hours (at the time of writing):
The EOS/KRW trading pair accounted for 57.84% of total volume in the previous 24 hour period, with prices being down 4.99% on the day.
The XRP/KRW trading pair accounted for 53.9% of total volume in the previous 24 hour period, with prices being down 17.54% on the day.
The QTUM/KRW trading pair accounted for 51% of total volume in the previous 24 hour period, with prices being down 2.93% on the day.
The ETH/KRW trading pair accounted for 11.73% of total volume in the previous 24 hour period. What is notable is that 7.98% of that is coming from a single South Korean marketplace, making it the highest volume trading pair for any ETH market. ETH is up 9.66% on the day.
Bitcoin enjoys such a substantial spread across markets, that the BTC/KRW trading pair only accounted for 2.53% of total volume in the previous 24 hour period. BTC is 6.09% on the day.