South Korea to Step Up Supervision of Bitcoin Trading After IMF Calls for Reform

Following a meeting with the International Monetary Fund (IMF), South Korea is pushing for structural reforms which include strengthening the management and supervision of digital currency transactions including bitcoin.

Also read: Two South Korean Bitcoin Exchanges Announce Hard Fork Plans

South Korea Pushing for Structural Reforms

The IMF has called for greater labor productivity and regulatory reform in major countries, including South Korea, Sedaily reported. The issue was discussed at the 36th meeting of the International Monetary and Financial Committee (IMFC), held in Washington, D.C. on October 14.

An IMFC meeting on October 14, 2017.

The IMFC meeting is the highest-level meeting of the IMF’s member countries, the publication noted, adding that the need for regulations on financial technologies (fintech) and bitcoin was raised at the meeting. “In the case of fintech and digital currency, there is a need to maintain a competitive financial market and to establish a fair competition system that can prevent winners from taking over,” the publication quoted the IMFC.

South Korean Deputy Prime Minister and Minister of Strategy and Finance, Kim Dong-yeon, attended the meeting. “We must actively push for structural reforms to achieve growth,” the news outlet quoted him saying last week. In addition, Sunday Seoul Newspaper quoted him saying on Friday:

We will strengthen the management and supervision of virtual currency transactions such as bitcoin.

Kim added, “the virtual money is a new field and it is expanding as a new field, but we are worried about the investment damage because there is no regulation. I’ll see if there is anything we can do.”

Regulations Underway

Kim Dong-yeon.

Kim also revealed on Friday that he will take an active role in “reviewing the role of virtual currencies such as bitcoin,” Inews24 reported. He was then quoted saying, “currently, the finance committee is preparing countermeasures against virtual money at the level of the government, and it should be dealt with as an axis of the economy in the financial sector.”

The Korean government has been discussing ways to regulate cryptocurrencies in the country. In July, a task force was set up to determine the regulatory framework for bitcoin. However, there are many legal issues pertaining bitcoin regulation such as whether to classify the cryptocurrency as money, asset or security.

Cha Hyeon-jin, head of the payment and settlement systems department at the Bank of Korea said in September that “virtual currency is not a monetary or financial product.” He elaborated:

Virtual currency traders are reporting to the Fair Trade Commission and local governments as e-commerce traders, and actual bitcoins are being traded as commodities.

The Financial Services Commission (FSC) has announced its plans to deal with digital currencies including bitcoin and ether, such as requiring banks to intensify their verification process and report any suspicious transactions. Soon after the FSC’s announcement, the Ministry of Science, ICT, and the Korea Communications Commission announced that they will conduct on-site inspections of cryptocurrency service providers including bitcoin exchanges.

There is also the issue of taxation. Last week, Han Seung-hee, the commissioner of the country’s National Tax Service, told lawmakers that the issue of how to best tax cryptocurrencies is being discussed, including the areas of capital gains tax, the VAT, and gift tax. In addition, at the end of September, the FSC banned all initial coin offerings (ICOs) in Korea.

What do you think of South Korea’s action? Let us know in the comments section below.

Images courtesy of Shutterstock, Centurylink, IMF, and Inews24.

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