Besides Japan, South Korea is the largest market for cryptocurrencies (Ethereum market share of 33% worldwide). Technically speaking, the country is much more modern than Europe and highly industrialised. Youth unemployment is still high, however, and young people in South Korea are just as enthusiastic about technology as young people in Japan. It´s an open secret in the crypto scene that many young South Koreans have discovered the brutal gambling in crypto currencies in recent months as an alleged escape from unemployment and lack of money.
This creates a dangerous bubble, which causes a large number of young people to fall into ruin when important cryptocurrencies will perhaps crash massively in the future. A few days ago in South Korea, concrete thought was given to banning or tightly regulating the whole crypto market. The outcry in South Korea was gigantic. Online petitions with hundreds of thousands of participants even brought down the President’s website.
The prices of the cryptocurrencies then collapsed briefly a few days ago around the world, and then rose again. Because officials in South Korea rowed back quickly. Apparently, cryptos are such a mass movement that the mass of traders is perceived as a significant constituency that can also cost votes in the next election? But as you can see at the moment, South Korea is trying to push through a kind of “cold ban” on cryptocurrencies.
Cold ban in South Korea
This is not done with laws, but by the financial industry itself. If financial service providers block or make it impossible to trade in cryptocurrencies, the government is well aware of the fact that it has not issued any legal bans. The Government is not gonna be a bad guy. As one hears from financial circles, South Korean banks (so far unconfirmed) think about prohibiting their customers from accessing foreign cryptographic exchanges online via issued credit cards (Visa and Mastercard).
Because pure online trading with cryptocurrencies needs to be done quickly. Anyone who opens a trading account online somewhere in an offshore paradise can use a credit card to transfer money to their virtual account in a matter of seconds so that they can trade immediately. This possibility would then be blocked. Officials of the “Shinhan Bank”, South Korea’s largest bank by deposits, is currently saying that the government’s recently enacted stricter requirements for the identification of crypto gamblers are not important, because the bank will no longer allow the opening of virtual accounts for crypto trading.
The three largest providers of cryptographic platforms in South Korea have also been informed by the Bank that existing virtual crypto accounts will be closed. From today’s January 15 on, existing customers could no longer transfer money into these accounts. Customers are only allowed to transfer money from these accounts back to “normal” bank accounts. Other banks in South Korea allegedly want to follow Shinhan. This sounds like a “cold ban” on Cryptos by the country’s financial industry!
It´s possible that this will result in a lack of purchasing pressure from South Korea in the future, which could make cryptocurrencies more susceptible to stronger price decreases in the near future. As we said, this can happen, but this is not a “will happen”! This is, of course, an elegant solution for the government in South Korea. The financial industry is the bad guy, not the Government. Because the Government hasn’t done anything. The banks have indeed issued the bans, and as private sector institutions they decide what they offer and what they don´t offer…
The Government in South Korea has only recently issued a guideline stating that hitherto anonymous traders in “virtual accounts” at banks must disclose their identity. Although the technology for this has now been created at many banks, the banks are not implementing it in practice. If a trader does not disclose his identity, he has to pay fines. However, since the banks don´t allow the possibility of identity verification, the customer can´t even make this identification. So a cold ban is going on in South Korea…
Südkoreas Präsident Moon Jae-in. Foto: Korea.net / Korean Culture and Information Service (CC BY-SA 2.0)