Park Yong-jin from the ruling Democratic Party of Korea is to introduce a regulatory framework for digital currencies, according to the Korea Herald.
The proposed new law will require regulatory approval from the Financial Services Commission by traders, brokers, and other business involved in cryptocurrency transactions.
It also has a hefty capital retention requirement of at least 500 million won ($436,300) as well as data processing facilities with further revisions to the law on income tax and corporate tax expected.
The law proposer, Park Yong-jin, appears hostile to this space, comparing digital currencies to tulips, so the move may be more ideological than practically considered.
It comes at a time when South Korea has taken a big interest in digital currencies, suddenly making it relevant to this space, not least because the ethereum trading volumes on Bithumb, South Korea’s biggest digital currency exchange, are nearly three times higher than on GDAX.
Price there is usually higher too, currently $20 above western prices, suggesting a considerable level of demand for digital currencies like bitcoin and ethereum.
South Korean companies have started adopting this space too. Samsung, which accounts for around 30% of South Korea’s GDP, has joined the Enterprise Ethereum Alliance.
Meanwhile, Korea Electric Power Corporation, South Korea’s biggest electricity provider, has launched a blockchain pilot to blockchenize electric cars charging stations.
As such, it may well be the case that any law which manages to pass would be more focused on practical considerations, especially as it may effect ethereum, not least because otherwise South Korea’s industry may be disadvantaged.
Because their neighbor, Japan, has shown itself to be very friendly to this space by declaring digital currencies as legal tender, the only country in the world known to do so.
Foreign investment and talent, therefore, may opt to go towards friendlier jurisdictions with their very mobile feet, taking any productivity growth or economic investment with them.
The latter has grown considerably with the combined market cap of all digital currencies now at around $100 billion while ethereum investors fund innovative projects to the tune of nearly a billion in just 19 days.
We, therefore, hope that the South Korean government, which is in a transition process following allegations of corruption towards their former recent president, takes care in what laws they propose since they may have strategic economic effects.
In particular, as blockchain talent is in very short supply while demand has skyrocketed with its recent rise in popularity, countries need to be careful they do not give themselves a reputation of hostility towards public blockchains.
That’s because most of the talent, and probably all of the highest level expertise, for both public and private blockchains, comes from individuals who are quite fond of ethereum in particular, but also bitcoin.
And since their choices are hardly limited, the approach of regulators may well be a consideration of where they decide to provide their talent, thus giving the decision of South Korea’s national assembly a strategic element.