South Korea’s government is considering a cryptocurrency exchange approval system similar to the state regulations in New York State, signaling a new position over regulations on digital currency exchanges from shutting them down to safely manage them.
A decision is not expected until after June’s local elections. An official from a virtual currency task force indicated the government is considering the State of New York’s system of allowing selective permission of virtual currency companies, according to Business Korea.
New York Offers A Model
New York State requires exchanges to have a “BitLicense” to trade virtual currencies. There are 15 detailed regulations including having a certain amount of capital and providing quarterly financial reports.
By accepting the New York law as a model, the country would be able to bring cryptocurrencies into the institutional system and supervise the market in an orderly manner, the government stated.
Most observers had expected the government to follow a hard line policy that included closing exchanges after the Ministry of Justice (MOJ) announced such a plan last month. The Financial Services Commission (FSC) had also said virtual currencies should be restricted.
A New Direction
The government changed its stance after cryptocurrency speculation subsided. Digital currency prices exceeded 20 million won ($18,332) early last month, but has since dropped to 8 million to 9 million won ($7,333 to $8,249). The government doesn’t think it needs to regulate the market unless it becomes overheated.
A ban on digital currencies would also compromise the development of the promising blockchain industry. Industry leaders claim virtual currencies and the blockchain industry are closely related
Kim Do-yeon, Deputy Prime Minister and Minister of Strategy and Finance, said it is not necessary to eliminate or suppress digital currencies.
Market Awaits Action
Government approval is expected to significantly impact the market. When the government announced plans to close exchanges last month, the government’s approval rating decreased.
Some observers noted that it is not too late to establish regulatory measures since the International Monetary Fund (IMF) and G20 will be discussing international regulations of cryptocurrencies.
The South Korean government will hold a meeting this month to respond to a national petition, according to an official who noted that some favor having taxes on virtual currency over adding regulations if the market’s volatility remains at the current level. The official stressed that the government will address future actions at the upcoming meeting.