SEOUL: South Korea’s government gave the strongest signal yet that it will allow cryptocurrency exchanges to keep operating in the country, a welcome development for traders who had feared an outright ban in one of the world’s biggest markets for digital assets. Policy makers will focus on making cryptocurrency trading transparent rather than outlawing it altogether, Hong Nam-ki, minister of the Office for Government Policy Co-ordination, said in a video a posted on the presidential website. It was the government’s first co-ordinated response to the public uproar over a justice ministry proposal in December to shut digital-asset exchanges. Talk of a ban in Korea had rattled traders around the world, fuelling concern that the country might cut off a key source of demand for bitcoin and its peers. Regulators globally are grappling with how to respond to the cryptocurrency boom, with responses ranging from an exchange ban in China to a licensing system in Japan. Korea appears to be leaning toward a more permissive approach than was once feared. Hong clarified the government’s position after more than 200,000 Koreans backed a petition on the Blue House website of President Moon Jae-in denouncing the justice ministry’s proposal. Korea’s system is similar to that of the US, where petitions that gather enough signatures elicit an answer from the White House. Hong said policy makers would continue monitoring the global discussion around cryptocurrencies and that an exchange ban was still a possibility, even though it was not currently a focus of the government. South Korea, which already prevents virtual currency trading by minors, foreigners and financial institutions, was studying a cryptocurrency tax and would beef up the security of digital assets, Hong said, citing the recent hack of an exchange in Japan.
Demand for Bitcoin in Korea was so extreme at one point in January that it lifted local prices 50% higher than those in the US. The premium has since dropped to about 5%, but local trading is still active.