South Korea Plans to Ease Cryptocurrency Regulations, Investors Optimistic
Yoon Suk-heun, the new Financial Supervisory Service Governor nominated by South Korea’s President Moon Jae-in, has stated that the government will ease cryptocurrency market regulations to facilitate growing demand from investors.
Market Impacted by Overly Strict Regulations
Earlier this week, Yoon told local reporters, “regarding cryptocurrencies, there are some positive aspects,” emphasizing that the agency will focus on imposing better and more practical regulations to stabilize the market and produce a more stable financial system.
FSS head Yoon has been described by local market analysts as a reformist and an activist, who is pro-market and prefers the implementation of fewer but proper regulations that could improve the finance market in various ways including investor protection and business growth.
FSS governor Yoon said that the agency will begin to cooperate with the Financial Services Commission (FSC) to inspect existing regulations on the finance market and current policies on the cryptocurrency market.
“The FSS will collaborate with the FSC when an inspection on policies and financial institutions has different configurations associated with different scopes. FSC inspects policies, while the FSS examines and supervises financial institutions but with the oversight of the FSC,” said Yoon.
According to Bithumb, South Korea’s biggest cryptocurrency exchange, its daily trading volume dropped by 90 percent from $4 trillion to $400 billion won after the real-name registration system was imposed by the FSS.
The pressure placed upon cryptocurrency exchanges and investors by local financial authorities led the market to destabilize and the demand for cryptocurrency to decline. A Bithumb official said:
“The daily transactions of cryptocurrencies plummeted to around 400 billion won from 4 trillion won before the financial regulators implement the new regulation. Markets expected the introduction of the real-name registration system would have been helpful to revive trading, but these efforts failed as local banks were reluctant to invite more crypto traders.”
Upbit, the most widely utilized cryptocurrency-only trading platform in South Korea, echoed a similar stance as Bithumb and said that while it does not oppose regulations, it is not practical for the government to “kill” the market by implementing improper regulations that do more harm than good.
“We don’t oppose regulations. But you can’t entirely kill the markets by simply imposing regulations. What the new FSS chief should think about is how the regulators should provide remedies to help crypto trading and blockchain technology get better,” said Upbit.
What Will Happen to the Market?
The so-called “Kimchi Premium” has returned to the South Korean cryptocurrency exchange market, demonstrating an increase in demand from local investors for cryptocurrencies like bitcoin and Ethereum. The volume of major cryptocurrency exchanges in South Korea started to rise and overall sentiment regarding the market by local investors has significantly improved.
If the FSS and its governor Yoon pursue their current plans and ease cryptocurrency regulations in the short-term, it is expected to fuel the demand for cryptocurrencies in the local market and allow volumes to recover.
The improvement in regulations for the cryptocurrency market and the potential legalization of domestic initial coin offerings (ICOs), which has become more likely with the support of 10 lawmakers, will allow the market to grow and rebound from the loss of recent months.