"Authorities Keep Distance Saying 'Coins Are Not Financial Products'... Only Issue Speculation Warnings"

Chaos in Cryptocurrency <Part 1>

"I felt like I was the only one not doing it"
People who couldn't invest in stocks
Late entry causes market overheating

[Asia Economy Reporters Eunbyeol Kim, Sehee Jang] "I had no interest at all in stocks or coins (virtual assets/cryptocurrency), but since everyone around me said they made money, I felt like I was falling behind and started to take an interest. I don't own a house, and even during last year's stock frenzy, I wasn't interested, but now that stock prices are unlikely to rise further, I was discouraged. Then, upon recommendations from people around me, I started investing in cryptocurrency."

"I was worried that later my children might ask, 'Dad, why didn't you make money back then?' so I decided to just dip my toes in briefly. I planned to just gain experience and get out, but after confirming that I could easily make 200,000 won in one day, it was hard to pull out. I can't focus on work because I keep checking the 50% daily price swings. I also wonder what my monthly salary was for. What is a coin? I still don't know."

These are posts from online investment communities. The amount of virtual asset transactions has increased to 1,500 trillion won this year, driven by the anxiety of "everyone else is making money, but I am just standing still." Since COVID-19, a lot of money has been circulating in the market, but while asset prices like real estate and stocks soared, earned income remained almost the same, prompting people to turn to investments. Especially recently, those who missed out on last year's stock frenzy have rushed into cryptocurrency investments late.

Authorities Unable to Grasp Investment Scale in Real Time

However, it is not easy for financial authorities to grasp the scale of funds flowing into cryptocurrencies in real time. Because cryptocurrencies have no physical form and are difficult to classify as financial products, no government department considers them within their jurisdiction. On the 19th, the Office for Government Policy Coordination, which has policy coordination functions, announced a "special government-wide crackdown on virtual assets" and revealed a crackdown plan focusing on illegal activities for this reason. They only conduct indirect monitoring to minimize side effects and have not established fundamental measures such as real-time market monitoring or integrating cryptocurrencies into the regulatory framework. Except for imposing real-name trading and anti-money laundering obligations in 2017, cryptocurrencies have been effectively left in a "blind spot."

There is essentially no official definition of cryptocurrencies by relevant authorities yet. Park Jooyoung, Director of Financial Innovation at the Financial Services Commission, said, "Just as investing in art is not considered investing in financial products, we do not view cryptocurrencies as such," adding, "We only aggregate funds flowing into the market when necessary, so currently, we cannot say whether there is an entity monitoring market trends or not." They only indirectly monitor aspects related to crimes such as money laundering. The Bank of Korea also confirmed its stance through Governor Lee Ju-yeol's statement that "there is no change in the position that cryptocurrencies have no intrinsic value." Therefore, the Bank of Korea internally monitors the scale of virtual asset transactions or the extent of the "Kimchi premium" (the phenomenon where domestic virtual asset prices are higher than overseas) through overseas sites. Since cryptocurrencies are not financial products, there is no system to monitor the market in real time like the stock market.

Monitoring Needed Even If Not Financial Products

However, experts agree that even if cryptocurrencies are not considered financial products, the government should at least monitor the market situation. Professor Kim Soyoung of Seoul National University's Department of Economics said, "(Financial authorities) seem to think it is not yet enough to cause financial instability and are leaving it as is," adding, "There may also be concerns about backlash from individual investors if market regulations are imposed." She added, "Although it is difficult to consider them financial products, there is a way to create a separate category for management." Professor Ha Jun-kyung of Hanyang University's Department of Economics said, "We need to manage so that loans do not go into risky virtual assets." He also argued that it is necessary to examine the impact of virtual asset investments on the economy.

"At least monitoring is necessary"
Left in a blind spot due to lack of physical form, monitoring needed also for income taxation purposes

As income taxation on virtual assets will begin in January next year, voices are emerging that monitoring is necessary to understand how much profit has been realized. Professor Sung Taeyoon of Yonsei University's Department of Economics said, "If profits are generated from virtual assets, they are subject to taxation," adding, "Market monitoring from a tax perspective is necessary."

The Ministry of Economy and Finance stated, "All income taxes, including earned income and business income, must be reported by the individual," adding, "If income is underreported, additional taxes will be imposed." They also said, "According to the Act on Reporting and Using Specified Financial Transaction Information (Special Financial Transactions Act), exchanges are required to report transaction details to tax authorities quarterly, so transaction records can be verified."

This content was produced with the assistance of AI translation services.