Following the establishment of supervision in the United States and Japan, South Korea and Dubai began to regulate Bitcoin

Following the United States and Japan in establishing regulatory legal frameworks, South Korea is also moving in this direction and is now establishing a legal framework to regulate Bitcoin and its use.

South Korea’s financial regulator, the Financial Services Commission, announced on November 17, 2016 that it will launch regulatory guidelines for digital currency transactions in the first quarter of 2017 in response to the growing online trade in Bitcoin and other digital currencies in South Korea.

The commission noted that digital currency transactions increased by an average of 6 percent per month in 2016 compared to the previous year. South Korea’s three largest exchanges processed 1.5 trillion won (about $1.3 billion) in transactions between January 2015 and October 2016.

Although South Korea’s Ministry of Science, ICT and Future Planning recently implemented regulations for Bitcoin operation registration, they did not provide financial regulatory guidelines, so the Financial Services Commission of South Korea has set up a working group to discuss the regulatory status of digital currencies and create licensing rules for exchanges.

Dubai Seminar

A local publication, Trade Arabia, also reported on the same legislative move by Dubai’s Supreme Legislative Council (SLC). It is said that Dubai will host a seminar on November 20, 2016 to discuss the current and future legislative policies and framework for Bitcoin.

Ahmad bin Meshar Al Muhairi, secretary-general of Dubai's Supreme Legislative Council, said that given the difference between Bitcoin and other traditional currencies - the lack of control by a central regulator - there is a need to spread its high level of security and privacy in the virtual world.

The importance of regulation

The South Korean committee said that Bitcoin is often used for money laundering, drug trafficking, tax-related crimes, etc. The implementation of supervision now can not only prevent the illegal use of digital currency, but also promote the development of Bitcoin, because the implementation of supervision can establish the legitimacy of Bitcoin in the eyes of the public.

Regulation can help win public trust and encourage new users to register. Japan is a good example. After the passage of the regulation bill in May, Bitcoin trading volume surged in the following six months. The Mt. Gox scandal ruined Bitcoin’s reputation in Japan, but the implementation of the regulation helped to restore confidence in Bitcoin among the Japanese public. Today, Japan is the second largest Bitcoin trading market in the world, second only to China.

The introduction of a regulatory framework will also create conditions for accepting Bitcoin for purchases. The Swiss Parliament began regulating Bitcoin and blockchain-based startups in June. Earlier, the Swiss town of Zug began accepting Bitcoin payments for a social service. Today, Switzerland allows users to use Bitcoin to buy train tickets, and Bitcoin is sold at stops across Switzerland.