As of Jan. 30, South Korean cryptocurrency traders will no longer be able to trade cryptocurrencies like Bitcoin and Ethereum anonymously.
Last week, major cryptocurrency exchanges in the local market including Korbit and Bithumb announced that starting Jan. 30, anonymous traders will be prohibited from investing in the market. Beginning today, investors are required to undergo a rigorous verification process to invest in the market.
The Korbit team said in a statement obtained by Cointelegraph:
“Non-Korean nationals, both resident and non-resident, will not be allowed to deposit KRW at any domestic cryptocurrency exchanges when the new KRW deposit method is implemented. In order to comply with the identification and anti-money laundering regulations being enforced by the government, the current KRW deposit method will be terminated by the end of January 2018.”
Kookmin Bank, the country’s largest bank, has also stopped providing virtual bank accounts to cryptocurrency exchanges. In South Korea, trading platforms provide each trader with a virtual bank account with which traders can use to withdraw and deposit Korean won without using actual bank accounts. From the virtual bank account, traders can then withdraw to their real bank accounts.
Instead, Shinhan Bank, South Korea’s second-biggest bank, along with five more financial service providers have started to support cryptocurrency businesses and investors. Existing traders are required by local exchanges to use bank accounts from Shinhan Bank and other banks in the country that support cryptocurrency investment.
In early December of last year, South Korea’s Justice Minister Park Sang-ki was heavily criticizedfor his premature statement on a non-existent cryptocurrency trading ban bill. Evidently, since then, the South Korean government has worked towards regulating the market, ensuring that investors are protected and businesses are compliant with regulations.
It is optimistic that the South Korean government has taken the approach of regulating the market rather than banning cryptocurrency trading, as minister Park suggested in December. But, experts fear that the South Korean government is imposing excessive regulations onto the local market that may hinder developments within the cryptocurrency sector.
Earlier this month, Yoon Seok-Hyun, a professor at South Korea’s most prestigious university in Seoul National University, stated that the government is rushing the implementation of strict regulations that could negatively affect businesses and investors in the sector. Yoo noted:
“The false and premature cryptocurrency trading ban proposal introduced by the country’s Justice Minister was rushed and unnecessary. The government must prepare for public Blockchains to be used as innovative platforms after excessive speculation in the cryptocurrency market decreases. It is important for the government to regulate the market properly in an uncertain sector like the cryptocurrency market.”
Most investors outside of the South Korean market are not aware of the fact that cryptocurrency exchanges will soon be asked to send details of any transaction that goes above a certain amount to the South Korean tax authorities.
Holding onto cryptocurrencies as savings does not leave investors subject to taxes. But, selling cryptocurrencies after recording earnings from the investment can be subject to capital gain tax. Local tax authorities have requested South Korean exchanges to implement a system that autonomously transfer transaction details of users trading large amounts for tax investigation.
Conclusively, the approach of the South Korean government is optimistic given that it has moved on from banning cryptocurrency trading altogether. But, moving forward, it will be difficult for local investors to trade large amounts of cryptocurrencies freely.