Uproar over crackdown on cryptocurrencies divides South Korea

Published 12/01/2018 in Asia

Uproar over crackdown on cryptocurrencies divides South Korea
A man walks past an electric board showing exchange rates of various cryptocurrencies at Bithumb cryptocurrencies exchange in Seoul, South Korea, January 11, 2018. REUTERS/Kim Hong-Ji

SEOUL (Reuters) – With a tech-savvy population quick to adopt the latest gadgets and a young generation facing dim prospects in the conventional workplace, South Korea has been a fertile ground for virtual currencies.

But the country’s swift embrace of bitcoin and other cryptocurrencies has been met with an equally swift backlash by regulators, who have gone so far as to propose outright bans on trading.

With markets around the world watching, South Korea has become a fault line between a generation that sees cryptocurrencies as a way to a better life, and government officials who have likened the market to gambling and warned that it encourages illicit behaviour.

On Thursday the justice minister, Park Sang-ki, sent global bitcoin prices temporarily plummeting and virtual coin markets into turmoil when he said regulators were preparing legislation to halt cryptocurrency trading.

As of Friday, a petition on the website of the presidential Blue House had drawn more than 120,000 signatures opposing the move. Heavy internet traffic briefly crashed the site.

The online uprising against the government’s plans puts President Moon Jae-in a tough spot, and his office was quick to say a ban is just one proposal under consideration.

“The latest idea to ban it all seems to have come out of a fear that when the bubble bursts and things go wrong, it will be all on the government,” said Yun Chang-hyun, an economics professor at University of Seoul.

A BETTER FUTURE?

BTC=BTSP stood at $13,709 after touching $12,800 the prior day.

Park Chong-hoon, an economist at Standard Chartered Bank in Seoul, said, “South Koreans find it hard to deal with the jealousy from watching their neighbours getting rich fast.”

It is a sentiment echoed by many. Scepticism of “get-rich-quick” schemes among South Korean officials has coloured past forays by international finance into the country.

In the mid-2000s the U.S. private equity fund Lone Star faced raids of its offices and a years-long legal battle with the South Korean government after the foreign fund made millions of dollars buying and selling a controlling stake in a major South Korean bank.

That controversy, which raised concerns over South Korean money flowing to foreign entities, is probably among several factors making South Korea officials wary of managing the new breed of markets originated abroad, analysts said.

“In a practical sense, the South Korean government needs to factor in some political aspects – if a growing number of people lose huge sums of money on bitcoin because of the government’s failed attempts to rein in the frenzy, people will blame the government,” Lee Dong-gwi, a psychology professor at Yonsei University. “Simply put, the South Korean government could be afraid of the political hassles of being held accountable.”

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