It seems that there is always an inevitable cost that ensues when the government makes augmented security executions, as can be seen in the drop in Bitcoin’s value after the announcement.
Other measures that have been put in place for new cryptocurrency investors require individuals to link their new accounts to their own bank accounts, challenging the decentralized nature of the digital currency. This extensive set of surveillance goes against both the decentralized and anonymous nature of Bitcoin that most investors favour, since now the flow of funds are monitored by these financial institutions as opposed to it being deregulated and void of any intermediaries.
Never-ending Scams and System Malware
One plausible assumption explaining further government intervention in cryptocurrency exchanges, is that it could just be raised concerns from more scam incidents that have been surfacing in the system, even after past bans of ICOs have been enforced in an effort to stop any more hacked accounts. Another way that one could see this new ban, is the government putting more safety precautions on the new market entrants who are prone to getting lured into investing in the ‘soon-to-burst bubble’ of this growing cryptocurrency industry. Raising capital through unregulated and open ICOs have been increasingly popular globally and especially in South Korea. However this subsequently stimulates more money into unproductive and speculative means. One of the biggest scams that has erupted media attention was when Bithumb, South Korea’s largest digital currency exchange platform which had 13.5% of total Ethereum exchanges going through its network, was hacked in July 5, 2017. One could only imagine how many South Korean cryptocurrency accounts were affected by this fraudulent scheme.
Unusual Price Surge
Other factors that may also explain the increased regulations is the unusual upheaval in the trading price of Bitcoin and other digital currencies in South Korea compared to countries in the rest of the world. Some critics have called this price surge “blind speculation” and have warned investors of the potential risks accompanying this trend. This unusual trend has caused the government agencies to believe that expected price fluctuations of digital currencies in South Korea would persist and worst of all - possibly crash, which would lead to dismay in investor profits.
Furthermore, there have been allegations of illegal trading that have sparked more government worry and inspections, since the shocking news that 4 cryptocurrency traders raised 25 billion South Korean won (an equivalent of 22 million US dollars) by selling cannabis using bitcoin. Governments want to eradicate any traces of these illegal activities, in which could accumulate unproductive investments, as soon as possible.
Future Possibilities for South Korean Economy
Despite all of these speculations regarding the reasons of the new crypto-currency accounts ban, there is still room for growth and opportunity for the digital technology and internet sector in South Korea, since these areas have been subject to recent economic booms. According to a study by Akamai in 2015, South Korea has the fastest internet speed in the world based on IP count. In addition to this, the world-renowned South Korea-based electronics giant Samsung Electronics, has made remarkable profits of $16.5 billion USD in the year 2016 alone. These phenomenal accomplishments in the South Korean electronics and technological industries have been globally recognized and could play a role in future economic growth in areas other than the digital currency industry.
Moreover, there are also vast opportunities that could take place possibly after South Korea has regulated its coin exchange terminals and found a way to eliminate the fraud and scam that has surfaced. Once this is done, there could surely be immense possibilities for South Korea’s expansion in the domestic economy or the global economy, as international trade opens doors for South Koreans to get involved in legal cryptocurrency exchanges out of its country’s borders.