While the heat builds up on local cryptocurrency trading, and the South Korean government approaches a decision on whether or not to ban it, the Financial Consumer Agency (FCA) has said it would be illegal for the country to halt trades of the digital coins.
“The government has yet to establish the legal grounds over related laws for consumer protection, in particular in the cryptocurrency market. Who is to blame for lots of negative news about the craze in the cryptocurrency market? It doesn’t make any sense that markets and investors should take responsibility,” the FCA said in a statement Sunday.
The group said Cheong Wa Dae should play a key role to address the issue to avoid any further confusion and to protect consumers.
“Financial Services Commission Chairman Choi Jong-ku showed his inability to take on the issue. Relevant government offices need to present a unified stance and clear message to the market along with measures over how to enable the digital currencies to transform the finance industry,” the statement said. It called on Choi to step down from his position.
As of now, several government agencies, including the justice and finance ministries, financial regulators and the National Tax Service have failed to find solutions to problems with cryptocurrencies, while announcing different stances.
The Finance ministry fears stifling cryptocurrency and fintech innovation, while the Ministry of Justice has been favoring a shutdown of all virtual currency exchanges. It believes crypto-assets could be used as a gateway to pyramid schemes and speculative investment.
“Underlying the cryptocurrency mania is an irrational belief that threatens the whole financial system. This is what the government believes. The daily volume of transactions by investors in crypto-trading, here, is estimated at between 2 trillion won ($1.9 billion) and 3 trillion won. The government thinks cryptocurrencies are a bubble and if the crypto-trading goes south, then that could have a substantial political impact, a scenario that the government is primarily worried about,” the FCA said.
It added there’s little precedent for consumer protection in the world of digital coins. “It’s conceivable that virtual currency investors who feel a ban on cryptocurrency exchanges, if implemented, would cost them money could file a lawsuit claiming damages,” said an FCA spokesman.
The country has seen a huge “bitcoin craze,” with the young and old betting on the cryptocurrency to build wealth. The high demand from investors here has created what they call a “kimchi premium,” the extra price Koreans have to pay to buy digital currencies, sold in Korea at higher prices than the global average.