Kim Yong-jin, South Korea’s Deputy Minister of Strategy and Finance, stated at a financial conference held at InterContinental Seoul that the cryptocurrency market is growing exponentially and gaining stability.
Minister Kim surprised local investors and cryptocurrency researchers by stating that alternative means of payment such as cryptocurrencies could threaten the foundation of the traditional fiat system.
“Cryptocurrencies like Bitcoin and Ethereum, which led an investment and speculative bubble earlier this year, have stabilized and are leading both the authorities and investors to question the foundation of the fiat system,” said minister Kim. He added that “the central bank should consider the emergence of alternative payment methods such as cryptocurrencies as a threat to the existence of the traditional fiat system.”
The Cryptocurrency Ecosystem in South Korea
The administration of President Moon Jae-in has garnered the majority support of the people of South Korea thanks to the government’s notable efforts to draft a peace treaty between the North and the South, and the government’s efforts to crack down on corrupt politicians. Former presidents Park Geun-hye and Lee Myung-bak have been arrested and incarcerated for corruption, with former president Park facing up to 25 years in prison.
This January, the Moon administration was struggling with a 20 percent decline in support from the citizens of South Korea. At the time, analysts attributed the drop to the abrupt announcement of a cryptocurrency trading ban by Justice minister Park Sang-gi, who claimed that the government would impose a ban on cryptocurrency trading in the short term during a press conference.
After significant pushback, on the same day, the Blue House, the executive office of President Moon, announced that there would be no ban on cryptocurrency trading in both the short and long term, and that the government would embrace technologies like blockchain to ensure that South Korea stays at the forefront of the fourth industrial revolution.
Since the end of the South Korea cryptocurrency trading ban scandal in January, the South Korean government has focused on imposing practical regulations and policies to protect investors in the cryptocurrency market and facilitate the growth of businesses.
Improving the ICO Ecosystem
Recently, several reports from mainstream media outlets in South Korea revealed that the government is considering lifting its ban on initial coin offerings (ICOs) in the near future, as the country’s largest multi-billion dollar cryptocurrency and technology conglomerates, including Kakao and Bithumb, have threatened to leave the country to establish blockchain ventures elsewhere.
The permanent relocation of Kakao’s and Bithumb’s blockchain businesses to Switzerland, which is the short-term plan for the two companies, could result in losses of billions of dollars for the South Korean cryptocurrency market.
To prevent South Korean companies from leaving the country, the government has started to draft a taxation policy for domestic ICOs to legalize and approve token sales.
“The financial authorities have been talking to the country’s tax agency, justice ministry and other relevant government offices about a plan to allow ICOs in Korea when certain conditions are met. Various scenarios such as the imposition of value-added tax, a capital gains tax, or both on trade; and the collection of corporate tax from local cryptocurrency exchanges, as well as the initiation of authorized exchanges with licenses, are being discussed,” a source within the government told The Korea Times.
The recent statement by the country’s finance minister, coupled with the government’s initiative to remain at the forefront of the global cryptocurrency industry, demonstrate the optimistic outlook the local authorities have towards the market.