Known for its rapid adoption of new technology, South Korea suddenly finds itself trapped in a cryptocurrency crossroads. finews.asia takes a look at which of its neighbors could benefit.
South Korea makes for a huge share of Asia's booming cryptocurrency trading, so a legislative push this week to ban trading of digital tokens on exchanges roiled the market for the new currencies.
The principal cause for concern from the financial and governmental authorities in Seoul is not dissimilar to other jurisdictions in the Asian region: the exponential growth and extreme volatility of bitcoin and other cryptos has spooked financial overseers from Singapore to China, and nearly everywhere in-between.
South Korea though also fears another dimension: the use of digital tender by its neighbour to the north as a potential economic weapon.
Driven Out
The ongoing purge on commercial banks and traders in cryptocurrency exchanges in the country could now see them relocating to more user-friendly locations in the region, according to experts polled by finews.asia.
For example, near neighbour Japan grasped the crypto nettle early on, in contrast to most of Asia. Japan's Treasury decided on a different approach to other jurisdictions in the Asia-Pacific: reforms last April ordered companies that deal with cryptocurrencies to become licensed by the financial regulator.
As a result, a total of 11 companies received a cryptocurrency dealer license from Japan's Financial Services Agency. The list of Japanese FSA-regulated cryptocurrency dealers includes Tokyo based BitFlyer, the world's largest bitcoin exchange by trading volume.
Other contenders are also emerging: the Philippine central bank, the Bangko Sentral ng Pilipinas is coordinating with the country’s market regulator, the Securities and Exchange Commission, in drafting a unified rule on cryptocurrencies like Bitcoin – when used as investments.
Just Tough Talk?
Clearly, like water seeking the lowest point, crypto trades will find a suitable venue, even if South Korea clamps down. But not all experts believe the country will actually follow through on its tough talk: Queen Capital's Bryan Cutter said lawmakers won't ratify the reforms for fear of imperiling economic growth.
In South Korea, as many as 30 percent of salaried workers are estimated to own a cryptocurrency, so the public backlash against curbs on trading could be swift. And what if Moon Jae-in's government does follow through? Look at South Korea's immediate neighbors to benefit, according to Cutter.
«In the unlikely scenario that a total ban is enforced, cryptocurrency speculators would be forced to go underground or go overseas to nearby countries with more crypto-friendly legislation - countries such as Japan, Taiwan and Singapore would benefit,» he told finews.asia.
