“We have to consider consumer protection because cryptocurrencies take on a financial nature.”

Kwon Dae-young, head of the financial innovation bureau at the Financial Services Commission, made the remarks at a debate on how to make transparent, safe and efficient crypto exchanges at the National Assembly Monday, saying, “The Korean government’s position remains the same as last year.” The bureau was created newly in August to nurture fintech industries and remove related regulations. But it appears difficult for the time being to expect the government to change its policy direction as Kwon made such remarks ahead of the announcement of the government’s fact-finding survey of initial coin offerings (ICOs)

“The government is in a position of encouraging blockchain technology but nothing has changed from its position last year because there has been no clear consensus regarding ICOs and cryptocurrencies,” he said. “What ordinarily takes place over 10 years in the financial market such as initial public offerings (IPOs) and investment attraction is done in a single day in the crypto space because of the simultaneous occurrence of issuance, listing and distribution,” said Kwon, adding that there is no other choice but to think of consumer protection due to cryptocurrencies’ financial trait. In other words, the government has to consider damage on investors, hacking and scams in the crypto space comprehensively.

He reiterated the government’s inevitable prudence in expressing the clear position on cryptocurrencies.

Kwon said, “Putting forward precise regulations means bringing cryptocurrencies into the institutionalized system.

“This opens the floodgate for cryptocurrencies and causes the problem of investor protection. So we have to be cautious.

“As 10 years have passed since blockchain made a debut, there must be an answer to such questions as: ‘has blockchain suggested new financial transactions?’”

With respect to the alleged promotion of cryptocurrencies by regulators in other countries, Kwon said it has been erroneously known in Korea that ICOs are allowed across the board in such countries as Germany and Switzerland. “We visited the countries in person to examine the examples but their allegedly broad-based ICO permission was not true,” he said. “Switzerland is a small country and Singapore’s tax policy is also different from Korea’s. We have to put forward policies taking into account Korea’s economic circumstances.” This is a position that it would be unreasonable if Korea applied inclusive policies abroad domestically.

Kwon, however, admitted that the government appeared to have reached a consensus on anti-money laundering (AML). “With relevant bills proposed already, there is no doubt about directly imposing AML obligations on crypto exchanges,” said Kwon, adding that “Japan would lead the dialogue on cryptocurrencies in the Group of 20 (G20) meeting to be held in Japan next year. It’s possible to build the balanced regulatory framework only after international agreements are made.”

Meanwhile, Monday’s debate also dealt with how to call cryptocurrencies. The Financial Action Task Force (FATF) decided in October to call Bitcoin crypto assets. Japan is also reportedly considering using the term crypto assets instead of cryptocurrencies. Currently, the Korean government calls cryptocurrencies virtual currencies and crypto exchanges virtual currency agencies. Regarding this issue, Kwon said, “Discussions on changing the terminology are underway internationally. Korea will ponder over the matter in the law-making process.” /edshin@decenter.kr

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