Cryptocurrency is a volatile market and most long-term investors are aware of that fact. However, recent news from the Asian sphere of cryptocurrency influence set off greater confusion than could be considered normal. While South Korea is rightly considered a major global technology hub, their cryptocurrency environment suffers from government regulations that are often at odds with one another. The country is eager to harness new technology for greater economic prosperity, while still maintaining an appropriate level of control over emerging industries.
The most recent change of heart occurred when a contingent of lawmakers made a heavy push to legalize domestic Initial Coin Offerings. Late 2017 and early 2018 saw a remarkable spike in ICO offerings, many of which were barely concealed money grabs. South Korea, understandably, sought to restrict the potential for fraud. Their ban on ICOs still persists, but all evidence suggests it will soon cease.
Recent South Korean Cryptocurrency History
While most countries are slowly placing regulation on their cryptocurrency markets, South Korea showed what can happen with a more aggressive approach. Banning domestic ICOs and eliminating anonymity struck at the heart of the market and caused serious damage to the blockchain ecosystem. While many factors aided the market collapse in Q1 of 2018, South Korea inarguably played a part. Each of their regulations, viewed separately, seems logical.
As part of the overall financial industry’s attempts to curb money laundering and illicit trade, Know Your Customer (KYC) and Anti-Money Laundering (AML) identification requirements are now standard for traditional institutions. South Korea imposed these restrictions on an environment that intentionally aimed for anonymity, and the results were rougher than expected. Although great progress was made, it took months for the market to recover from the shift in identity requirements. While fully willing to comply with KYC and AML, South Korea’s biggest exchange, Bithumb found itself in a position to run their own ICO. Due to the domestic ban, they made moves towards an overseas campaign.
The Market Reopens
Of course, this would have been disastrous for the South Korean government. By this time, they had made it clear that they wished to foster the nascent industry, and their largest local corporation fleeing the country would have done irreparable damage to that vision. As such, their recent rush to reopen the South Korean ICO market likely has to do with avoiding this potential pitfall.
All indicators say that the market hiccup is well dealt with, and regulators expect to have the necessary regulatory framework in place before the end of the summer. South Korea and Japan drive most of the Asian component of the cryptocurrency market – the healthier their environment, the better for the global market as a whole.
Article By: Adam Stone
