Virtual Currency Controls

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The boom in Bitcoin and other virtual currencies is potent here in South Korea, which accounts for 20 percent of the world’s virtual cash trade. The South Korean government is taking measures to regulate virtual currency transactions. The first such measure is banning minors from dealing with virtual money.

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With the virtual currency investment boom spiraling out of control, the government convened an emergency meeting of vice ministers. At the meeting, government officials agreed to ban under aged citizens from opening virtual currency accounts and performing financial transactions using virtual money. The new regulations also prohibit financial institutions from possessing and purchasing virtual currency as well as acquiring mortgages and investing their equities in the form of virtual currency. The government has also decided to enact regulations on how the virtual currency exchange must be operated. Under the new regulations, financial institutions will be mandated to deposit customers' assets separately, verify users' real names, and disclose the amount of virtual currency orders. They will be also obliged to prevent money laundering. The new regulations clearly define what virtual currency exchanges are not allowed to do, which include virtual currency fundraising, credit extension, door-to-door sales, multi-level marketing, and telemarketing. Those who fail to comply will be punished. The government will also consider carefully whether or not to levy taxes on profits from virtual currency investments using examples from other countries. Among the commercial banks, Woori Bank and Korea Development Bank have decided to shut down their virtual accounts, while Shinhan Bank has decided to suspend the opening of additional virtual accounts. Meanwhile, the government's emergency measures had been leaked on the Internet about two hours before the official announcement.