South Korea to introduce Bitcoin regulation in 2017

As Bitcoin and digital currencies gain popularity in South Korea, financial regulators have set up a digital currency working group to focus on the regulation and licensing of Bitcoin exchanges.

South Korea’s JoongAng Daily reported that at a meeting last week, the working group agreed for the first time to regulate the Bitcoin and digital currency sector, with more to come in the coming months.

Huobi Blockchain Research Center learned that the Financial Services Commission (FSC) held a meeting and, in addition to establishing a working group, also mentioned other agencies, including the Bank of Korea, the Central Bank, the Ministry of Strategy and Finance, and the Financial Supervision Department. In fact, the Ministry of Science, ICT and Future Planning is tasked with overseeing the registration of Bitcoin exchanges, but there are no regulatory guidelines yet. The current structure may change in the first quarter of 2017.

As for regulatory approaches, the working group will look to existing legal frameworks in the United States and Japan — New York State’s BitLicense is a notable example; Japan’s legislature also recently passed a bill to regulate bitcoin trading in the country.

Last month, FSC Chairman Yim Jong-yong first unveiled a template for Bitcoin regulation in a speech, saying:

“The government will promote the systematization of global digital currency in sync with global trends in the United States, Japan and other countries.”

Bitcoin usage has made huge inroads in the country, with the top three bitcoin exchanges handling a combined 1.5 trillion won (about $1.3 billion) in transactions. Other data released by the FSC showed that average monthly bitcoin trading volume grew 6% compared to last year.

Bitcoin is gaining popularity in South Korea

According to the FSC’s statement at the meeting, strict measures will also be taken to prevent exchanges from abusing digital currencies for regulatory reasons.

“Digital currency is often used for money laundering, drug trafficking and tax-related crimes because it is unregulated.”

The increased activity by regulators and officials coincides with developments in South Korea’s financial technology sector in recent months. For example, South Korean securities operator Korea Securities launched a blockchain-based marketplace for private companies and startups to trade stocks. Shinhan Bank, a major financial institution in the country, also announced a new Bitcoin-based remittance service that will serve the Korea-China corridor, a clear example of how traditional banks are innovating with Bitcoin.