Many countries tighten cryptocurrency regulatory policies. More than 90% of cryptocurrency trading platforms in South Korea may be shut down.

Since April, many countries including the United States, India, Turkey, and South Korea have successively implemented stricter supervision on cryptocurrency transactions. In the short term, many small and medium-sized exchanges have to shut down operations. Combating "anti-money laundering" is the main purpose of supervision. Secondly, cryptocurrency transactions are volatile, and reducing the investment risks of domestic investors is also one of the purposes of supervision.

Chen Xin, executive director of PayPal Financial Investment and Trading Department, analyzed to our reporter that the purpose of supervision in different countries is slightly different, and the common goal is definitely to control the right to mint coins. Secondly, prevent Bitcoin from being used for money laundering, terrorist financing and other issues. This is not something that can be completed in stages, but based on the principle of on-site supervision, countries will definitely continue to strengthen supervision of these potential risks that significantly endanger national interests. Of course, governments of various countries will definitely directly strike against blockchain projects with ulterior motives. Overall, supervision has a greater positive impact than a negative impact on the development of the industry in the long run.

Many countries tighten cryptocurrency regulation

In recent days, South Korea has taken concentrated regulatory measures on cryptocurrencies. According to South Korean media reports, South Korean Finance Minister Hong Nam-Ki publicly stated that South Korea plans to impose a 20% capital gains tax on cryptocurrencies in 2022, and we hope to promote tax equality through taxation.

The news has sparked dissatisfaction among cryptocurrency investors, and Koreans who invest in cryptocurrencies have called on the South Korean government to postpone the capital gains tax on cryptocurrencies, or adopt the same tax standards as stock transactions. It is understood that Korean stock and fund investors need to pay taxes when capital gains exceed 50 million won. Previously, the income from cryptocurrency transactions was attributed to "miscellaneous income" (lottery, bonuses, etc.). According to the current plan, a 20% capital gains tax will be levied on this basis in 2022. However, due to the anonymous nature of cryptocurrency transactions, it will be difficult to count the income from each transaction, and there are still many obstacles to the implementation of the tax.

South Korea has followed the United States in imposing capital gains tax on cryptocurrencies, and perhaps more and more countries will follow suit to regulate cryptocurrencies.

Previously, South Korea's "Act on Reporting and Using Specific Financial Transaction Information" (hereinafter referred to as the "Act") came into effect, laying the regulatory foundation for cryptocurrency taxation. The "Act" imposes strict supervision on cryptocurrencies, including that companies engaged in cryptocurrency trading, storage, and management in South Korea must register with the South Korean Financial Intelligence Agency and obtain real-name account information of virtual currency users from banks.

Currently, only the top four cryptocurrency trading platforms in South Korea, Bithumb, Coinone, Upbit and Korbit, have reached cooperation with relevant banks in South Korea, but other relatively small trading platforms are unlikely to meet the requirements, and most of them may be shut down within 5 months. For example, South Korea's local cryptocurrency exchange Daybit issued a statement: "Due to the tightening of anti-money laundering laws, the company will voluntarily shut down its business."

The South Korean government also announced on April 18 that it plans to crack down on any illegal activities involving cryptocurrencies, including money laundering and fraud, and is discussing with the Ministry of Finance to develop guidelines for overseas remittances involving crypto assets. According to Korean media reports, some South Korean investors appear to be trying to transfer fiat currency overseas and buy cryptocurrencies from over-the-counter sellers in other countries.

Wayne, CEO of TokenInsight, affirmed that regulation is a positive statement in the long run. The regulatory frameworks in different regions are different, and the impact on the industry cannot be seen in one or two days. Regulation means recognition, and recognition means legality. The early industry was an industry without rules, and regulation will inevitably bring long-term benefits and redistribution of benefits.

The Central Bank of Turkey will publish cryptocurrency regulations within two weeks, and will not completely ban it. The Ministry of Finance is studying cryptocurrency regulatory rules; Ireland has passed the 5AMLD regulations, forcing crypto companies to register with the central bank within three months; the Bank of England and the Ministry of Finance jointly established a central bank digital currency working group. India is discussing the establishment of the world's most stringent policy on cryptocurrencies, which may criminalize the holding, issuance, mining, trading and transfer of crypto assets.

Chen Xin said that for the entire blockchain industry, the emergence of new technologies will inevitably lead to the update of new regulatory models. Countries will also consider the changes brought about by the application of new technologies. If they do not keep up with global technological changes, they may be at a disadvantage in the next few decades. In order to gain a favorable position in this industry, they will also open up some experimental space.

"Blockchain itself is experimental in nature, and sandbox supervision is also a way to maintain innovation, allowing new technologies room to develop. However, it is carried out under conditional monitoring and management, which is also positive for the development of the industry. Inclusion in supervision also shows that the development of this new technology is recognized at the national level. As the saying goes, the devil is always stronger than the saint, and they are complementary to each other," Chen Xin pointed out.

Anti-money laundering is still a pain point for crypto transactions

In the past year, Yiwu foreign trade merchants have been "frozen" one after another, which has also concerned people across the country. However, Yiwu's card freezing is mainly because in foreign trade transactions, due to restrictions on US dollar transactions or requirements of foreign buyers, many foreign trade order payments have to be processed through underground banks, resulting in "freezing of cards". Solving this problem requires changes and adjustments to multiple foreign trade-related regulations and processes.

At present, the trend of using cryptocurrencies for money laundering is expanding, but compared with traditional money laundering methods such as underground banks, the amount involved is still relatively small. However, it can be expected that as the prices of cryptocurrencies such as Bitcoin and Ethereum continue to rise, more and more crypto investors will join in, and countries will tighten their anti-money laundering supervision of cryptocurrencies. Cryptocurrency-related "freezing card" incidents have also occurred one after another, and how to supervise has also become a thorny issue for regulatory authorities in various countries.

Many crypto industry practitioners told our reporter that the industry must actively embrace regulation in order to be healthy. In 2021, even though the price of cryptocurrencies has skyrocketed and more and more investors have invested, from a broader perspective, the regulation of cryptocurrencies is still very immature, as can be seen from aspects such as the taxation of cryptocurrency investments.

OKLink senior researcher Jin Pengcheng analyzed to our reporter that at present, we can see that regulation is tightening at the global level. The US government has drafted regulatory rules for cryptocurrencies, my country's central bank is also conducting relevant regulatory research, and South Korea, India and other countries have also begun to make relevant deployments. The formulation and tightening of regulation will undoubtedly bring short-term pain to the crypto industry, but it will be conducive to the long-term healthy development of the industry.

Jin Pengcheng analyzed the benefits of several aspects of supervision:

First, tightening regulation will effectively change the extensive development mode of the crypto industry. After a period of wild growth, the prosperity of the crypto industry has proven the value potential of blockchain technology, but also exposed the risks of the industry in financial risk control and other aspects. With the improvement of global regulation, the crypto industry needs to balance the relationship between growth and risk control, and experience the pain of sacrificing some profits.

Secondly, the continuous improvement of supervision will effectively guide the formulation of relevant standards for the encryption industry and empower the industry. Blockchain technology was included in the scope of new infrastructure last year. Seizing blockchain industry standards is an important national strategy. As a native enterprise in the blockchain industry, OKLink Group has taken the initiative to assume industry responsibilities and actively participated in the establishment of multiple standards. In September last year, OKLink applied anti-money laundering standards in the blockchain industry with Baidu, Qihoo, Xiaomi and other companies. The continuous improvement of supervision will be conducive to the construction and improvement of subsequent industry standards.

Finally, with the continuous formulation of regulatory policies and the continuous improvement of industry standards, the potential of the crypto industry will be continuously released, continuously empowering traditional industries, giving play to the historical role of blockchain technology in new infrastructure, promoting the healthy development of the crypto industry, and creating new growth points for the national economy.

Cryptocurrency-related institutions working with banks to verify the real names of traders remains an important method for combating money laundering in the cryptocurrency sector.