Financial institutions looking to launch Bitcoin (BTC) derivatives and other crypto-based financial products in South Korea have found themselves an ally in the government. As per the report of local news channel Business Korea, the country’s Presidential Committee on the Fourth Industrial Revolution (PCFIR) has submitted a proposal that would enhance the institutionalization of crypto-assets.
The PCFIR was established in 2017, by the power of a presidential decree. This committee has the primary responsibility of coordinating recommendations and policies within the science and technology industry of South Korea. Additionally, the PCFIR holds events and forums that aim to deliberate on the potential roles and functions of emerging technologies. The citizens are always being encouraged to participate in public campaigns so that the committee would be able to find out whether a particular technology must be adopted or not.
In the latest report, the committee noted that the country relies heavily on foreign custodians in terms of handling and managing crypto-assets. The local financial sector is being advised to establish and implement a custody solution that would somehow lessen the dependence of the country on foreign entities.
The PCFIR also proposed directly listing BTC on the South Korea Exchange (KRX). Notably, KRX, which is headquartered in Busan, is the country’s sole securities exchange operator. Furthermore, the committee suggested that the government should consider issuing licenses to crypto exchanges. However, it was stressed that there must be a clear guideline for cryptocurrency exchanges first before allowing them to integrate crypto-related products into the country’s existing financial system.
As recounted by the PCFIR, as of May last year, the global cryptocurrency trade was hitting over 80 trillion won ($68 billion) in a day. The figure means that crypto-assets are here to stay, and there’s no way governments can stop it, so South Korea might as well take advantage of the nascent market. To do so, the government must permit institutional investors to engage in crypto-related dealings. Furthermore, the committee proposed the promotion of over-the-counter (OTC) desks within the trading space of institutional investors.
However, while several industry accounts claim that South Korea is doubling its effort on establishing a comprehensive framework regarding digital assets, some industry commentators emphasized that there is still plenty of room for confusion. For instance, the government itself announced that under the current income tax law, crypto exchanges are under no obligation to pay tax for their profits. However, a local crypto exchange, Bithumb, is being ordered by the country’s tax agency to pay 80 billion won ($68.9 million) for its earnings acquired from cryptocurrency-related dealings.