"Virtual Currency Special Act Is a Stopgap Measure... Guidelines Should Be Expedited"

Chaos in Cryptocurrency <Part 2>

A Market Too Large to Just Watch

Need for Clear Legal Grounds

Insider Trading, Market Manipulation, etc.

Financial Authorities Should Create Guidelines

Industry Calls for "Enactment of Industry-Specific Law"

Inclusion in the Regulatory Framework Needed to Prevent Speculation

[Asia Economy Reporters Eunbyeol Kim, Sehee Jang, Minwoo Lee] As the influx of funds into cryptocurrencies (virtual assets) such as Bitcoin enters an overheated phase, experts' warnings are growing stronger. Financial authorities have been hesitant to step forward, reasoning that bringing cryptocurrencies, which lack tangible substance, into the regulatory framework would mean recognizing them as products and could potentially encourage speculation.

While some experts believe there is little that can be done at this stage, voices calling for the government to manage the industry more actively are growing louder. It is argued that the government needs to not only conduct special crackdowns to prevent illegal activities such as money laundering but also ultimately clarify the legal basis. If enacting an industry-specific law immediately is too difficult, at least the financial authorities creating guidelines could be a viable approach. Especially since from next year, taxes will be imposed on cryptocurrency trading profits and inheritance/gifts, there is an unspoken pressure that the government cannot continue to neglect the market simply because it claims cryptocurrencies are "not financial products."

Cryptocurrency Regulation Equals Consumer Protection... Government Should Create Guidelines

Scholars who have studied cryptocurrency and financial laws point out that the market has already grown too large to leave as is. The daily trading volume of cryptocurrencies in South Korea reaches 30 trillion won, twice the daily trading volume of the KOSPI, and over the past three months this year, more than 1,500 trillion won has flowed into cryptocurrencies. Cheon Chang-min, a professor of Global Techno-Management at Seoul National University of Science and Technology, said, "An unprecedented amount of money has flooded the market," adding, "Looking at the ranking of cryptocurrency trading by fiat currency, South Korea suddenly jumped from 5th-6th place to 3rd." He argued that the government should establish market order by at least creating guidelines. Professor Cheon explained, "When P2P (peer-to-peer) lending companies emerged, guidelines were operated for 3-4 years to understand market order before enacting the Online Investment-Linked Finance Act (OnTu Act)." Although P2P lending was effectively outside the regulatory framework, the industry was eventually incorporated into the system once the industry was maintained.

Above all, the biggest problem is that it is difficult to grasp the scale of intangible assets generated daily, and their value fluctuates wildly multiple times a day, showing instability. However, the only legal regulation related to cryptocurrencies currently is the recently enacted "Special Financial Information Act (Special Act on Reporting and Using Specified Financial Transaction Information)." Professor Cheon said that the Special Act has reduced the number of cryptocurrency exchanges from about 100 to 7-8, and when the market calms down somewhat, additional regulations or user protections can be announced. He mentioned insider trading and market making (price manipulation) as points to consider when creating guidelines.

Professor Lee Hyo-kyung of Chungnam National University Law School also said, "Although speculation is high, there are movements overseas to incorporate cryptocurrencies into the regulatory framework," adding, "They are allowing business operators to be subject to conduct and business regulations by recognizing cryptocurrencies as a means of payment." Professor Lee noted, "Since Japan has newly defined cryptocurrency businesses, we cannot keep postponing either." While the government cannot prevent individuals from engaging in risky transactions, properly managing the industry itself has a consumer protection effect.

Looking at overseas cases, regulation by authorities is possible. In the United States, the Commodity Futures Trading Commission (CFTC) regulates Bitcoin and Ethereum as commodities, while the Securities and Exchange Commission (SEC) regulates securities-type cryptocurrencies. New York State created the BitLicense, a license for cryptocurrency handlers. Japan introduced a registration system for cryptocurrency exchanges, and last year, the Financial Services Agency (FSA) established a crypto asset exchange business under the Payment Services Act, which corresponds to South Korea's Electronic Financial Transactions Act. European countries such as the UK, France, and Switzerland are also actively moving to incorporate cryptocurrencies into the regulatory framework.

Industry Calls for "Enactment of Industry-Specific Law"... But Concerns Over Discriminatory Regulation

The industry has long requested inclusion in the regulatory framework. In the absence of legal definitions, it is difficult to distinguish reasonable operators from others, and it is also impossible to know which cryptocurrencies are being traded properly. The main reason is to prevent the entire industry from being dismissed as "blind investment."

Park Seong-jun, director of the Blockchain Research Center at Dongguk University, pointed out that the government's perspective of not recognizing cryptocurrencies as assets must change and argued for the need for an industry-specific law. Director Park said, "The Special Act on Reporting and Using Specified Financial Transaction Information was introduced only to comply with international anti-money laundering guidelines and is merely a temporary measure with little significance on its own." Kim Jae-jin, director (lawyer) of the Korea Blockchain Association, said, "Member companies of the association have followed a voluntary code of ethics even before cryptocurrencies were included in the Special Act," adding, "Ultimately, an industry-specific law must be enacted for the domestic cryptocurrency ecosystem to grow rationally." Director Kim added, "Although regulations such as conduct codes may burden operators, they are necessary in the process of growing the industry."

However, contrary to the industry's claims, there are opinions that enacting an industry-specific law could lead to "discriminatory regulation." Professor Min-hwan Lee of Inha University's Department of Global Finance said, "If regulations are implemented by industry, discriminatory regulations may arise," adding, "Since cryptocurrencies are handled worldwide, if the degree of regulation differs by country, there could be backlash."

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