Licensing scheme on the horizon for South Korea cryptocurrency exchanges

Licensing scheme on the horizon for South Korea cryptocurrency exchanges

After weeks of signaling a possible ban on domestic cryptocurrency exchange operations, authorities in South Korea have pulled a one-eighty and are now reportedly considering a licensing system to regulate virtual currency exchanges in the country.

On Monday, Korean news outlet Business Korea reported that members of the government’s virtual currency task force are examining a “cryptocurrency exchange approval system.”

“We are positively considering the adoption of an exchange approval system as the additional regulation on cryptocurrencies. We are most likely benchmark the model of the State of New York that gives a selective permission,” a government ministry official told the Korean news outlet.

The system will be based on New York’s BitLicense, which was introduced in June 2015 shortly after the collapse of Japan-based Mt. Gox. The license defines virtual currency businesses based on their activities—storing, holding, maintaining custody of a virtual currency, and performing exchange services. So far, only four exchanges have been granted the elusive BitLicense: Coinbase, Circle, Ripple, and recently, BitFlyer.

For the past few months, South Korea has been in an upheaval over the government’s mixed messages regarding the legality of cryptocurrencies and transactions that involve digital coins. In January, the local crypto community was rattled by news that Seoul is banning cryptocurrencies. That turned out to be a false alarm, prompting South Koreans to call for the termination of Justice Minister Park Sang-ki, who announced the supposed ban.

The confusing reports have resulted in more than 228,000 residents to petition South Korean President Moon Jae-In and his government to leave the cryptocurrency market alone.

It appears that the government is paying attention to the South Korean residents. Deputy Prime Minister Kim Do-yeon recently said there’s no need “to get rid of or suppress digital currencies.” In fact, the Ministry of Strategy and Finance, which Kim also heads, is reportedly aggressively planning to adopt the exchange approval systems.

A final decision, however, isn’t expected until June.

“We will hold a meeting to respond to national petition related to digital currencies this month but we are highly likely to make up for the defects of existing measures only at the meeting,” the official said, according to Business Korea.

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