HONG’S STATEMENT ON VIRTUAL CURRENCIES

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Finance Minister Hong Nam-ki says cryptocurrencies are not a valid currency or financial asset. He added that institutionalizing them other than through the scheduled exchange setup later this year will be difficult and stressed that taxing profits is also inevitable.

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Before stating his view on the issue of cryptocurrencies, Finance Minister Hong Nam-ki first clarified its definition. He said that from the government’s standpoint, the correct term is crypto asset, not currency saying it has no intrinsic value.

[Soundbite] Hong Nam-ki(Finance Minister) : "The perception that crypto assets can replace currency has gone too far. They should be viewed as intangible assets."

He also reaffirmed the Financial Services Commission's stance that institutionalizing the market and introducing regulatory protection will be difficult. He explained that unlike stocks and bonds where private sector funds are pooled for corporate activity, crypto assets are not used for productive purposes. This means they can’t be regulated or protected like other financial investment products. But Hong did stress a certain degree of oversight will begin starting September such as filing reports with an exchange platform.

[Soundbite] "It can be viewed as a semi-institutionalization measure. Oversight will be about that degree."

But he drew a clear line against delaying the scheduled taxation on related profits, which is disputed among lawmakers. Come January, the government will impose a 20 percent tax on the gains from virtual currency transactions that exceed 2.5 million won. The government continues to stand firm on its position against regulatory control and plans to go ahead with taxation. But the controversy still lingers. When pushing for taxes on stock profits last year, the government initially said it will keep boundaries on tax exemptions but later ended up broadening that scope, affected by public opinion.