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 task force to focus on regulating Bitcoin exchanges.

According to Korea JoongAng Daily, at a meeting last week, the working group said that the Bitcoin and digital currency sector does need to be regulated.

The Financial Services Commission (FSC) also held a meeting, and in addition to the established working group, the country's central bank, the Bank of Korea, the Ministry of Strategy and Finance, and the Financial Supervision Department also participated in the meeting. As it stands, the priority of the Ministry of Science and Technology, the Ministry of ICT, and the Ministry of Future Planning is to oversee the registration of Bitcoin exchanges without any regulatory guidance. This current situation will change in the first quarter of 2017.

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

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

"Following this trend in the United States, Japan and other countries, the South Korean government will also begin to fully promote the systematization of digital currency."

The country’s bitcoin adoption has been a huge success, with the top three bitcoin exchanges trading 1.5 trillion won (about $1.3 billion). The FSC also released another statistic: bitcoin trading volume has increased by an average of 6% per month compared to last year.

Bitcoin is gaining popularity in South Korea

The South Korean committee said at the meeting that strict measures are indeed needed to prevent the abuse of digital currencies.

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

South Korea’s financial technology sector has continued to grow in recent months, with increasing activity from regulators and officials. For example, Korea Exchange, the country’s sole securities agency, launched a blockchain-based marketplace for private companies and startups to trade stocks. Shinhan Bank, the country’s main financial institution, also announced a new Bitcoin-based remittance service to serve South Korea-China transactions, highlighting a notable example of traditional banks using Bitcoin innovation.