The Korean cryptocurrency market continues to remain in a state of uncertainty. The Prime Minister’s Office for Government Policy Coordination took the lead in directing the government’s policy earlier in 2018, replacing the Ministry of Justice. However, the various agencies constituting the government’s cryptocurrency task force have yet to formulate a unified stance on the Korean cryptocurrency market, and action in the National Assembly to legislate cryptocurrency has stalled.
Following the warnings from the Financial Supervisory Commission that banks servicing the Korean cryptocurrency exchanges would be held responsible for violations of anti-money laundering regulations, the implementation of the “real name” banking system has slowed, creating practical hurdles for both retail and institutional investors in completing new registrations on the Korean exchanges.
Although the Korean cryptocurrency exchanges are seeking to expand the number of coins offered on their respective platforms, as well as seeking to implement crypto-to-crypto trading pairs, at the moment the market conditions remain tenuous.
Compounding the uncertainty in Korea are significant legislative developments in the United States. On February 6, 2018, Chairman Jay Clayton of the US Securities and Exchange Commission (the “SEC”) stated before a US Senate hearing that “every ICO I’ve seen is a security,” leaving open the questions of what effect this would have on initial coin offerings in the United States and elsewhere, and more worryingly, the potential ramifications on coins that had ICO’d in the past that are currently trading on the various cryptocurrency exchanges around the world. The March 7, 2018 statement by the SEC arguing for the registration of US cryptocurrency exchanges as a “national securities exchange” expands the US SEC’s focus from ICOs to currently trading cryptocurrencies.
Potentially due to the increased uncertainty in the United States and the need for coin issuers to seek capital outside of the United States, we have been experiencing a sharp increase in potential ICOs targeting Korean investors. In addition, foreign investors continue to seek access to the volumes traded on the Korean cryptocurrency exchanges.
It is unclear what if any impact the SEC’s regulatory actions may have on the Korean cryptocurrency market. However, it is likely that regulators in Korea will be watching the US regulatory environment for additional insight in the formulation of their own policies.