Go Search Go Contents Go to bottom site map

(Yonhap Feature) Bitcoin investment booms in S. Korea, but bubble risks grow

2017/09/15 09:00

Article View Option

By Kim Deok-hyun

SEOUL, Sept. 15 (Yonhap) -- About four months ago, Ji Yong-hoon bought around 2 million won (US$1,777) worth of bitcoin at his friend's suggestion. In just 10 days, the value of his investment into the cryptocurrency more than doubled.

But, his dream of easy riches appeared to lay wrecked as the price of bitcoin plummeted a few days later.

"Stock markets are closed on holidays and weekends, but the cryptocurrency market runs 24 hours a day, 365 days a year," said the 38-year-old office worker.

"As the cryptocurrency market shows extreme price volatility several times a day, I can't put down my smartphone on holidays or even at dawn," Ji said.

After touching an all-time high of US$4921.7 earlier this month, bitcoin fell to $3,865.34 on Wednesday, amid media reports that China is set to crack down digital currencies.

Still, bitcoin has shown a dizzying rise since the start of this year, when the price stood at $997.75, according to data by Bitstamp.

Price fluctuations in South Korea's bitcoin and other cryptocurrency exchanges are heavier than other nations as its volatility is driven by rumors and speculative information.

Many investors appear to sell or buy bitcoins and other cryptocurrencies, based on unconfirmed information posted on Internet blogs.

Despite a boom in transactions of digital currencies, the exchanges of such are largely unregulated as they are not recognized as financial products. Also there are no rules protecting people who invest in digital money.

An official at the Financial Services Commission (FSC), South Korea's financial regulator, said, "Local cryptocurrency markets look like around-the-clock gambling houses without government regulations."

   South Korea is home to one of the world's largest bitcoin exchanges, with about 1 million people estimated to have the digital currency.

A daily trading volume of Bithumb, the largest bitcoin and ethereum digital currency exchange in South Korea, has surpassed 2.6 trillion won, bigger than a daily trading volume of the nation's junior KOSDAQ stock market.

The South Korean won currency was estimated to be the third most traded currency in buying or selling bitcoin, behind the Japanese yen and the U.S. dollar, according to the nation's financial regulator.

Bitcoin, the best-known digital currency, was introduced in 2009 in the aftermath of the global financial crisis by pseudonymous computer developer Satoshi Nakamoto.

With bitcoin, which can be traded online via a peer-to-peer payment network, people can buy everything from coffee to personal computers.

Although it has been gaining popularity by the general public it has yet to become an accepted form of payment at major retailers and online shops in South Korea.

South Korean government officials also have reservations about cryptocurrencies and expressed doubt that they will become an alternative payment tool because of price volatility and risks of financial scam

On Sept. 3, the FSC said it will step up monitoring and carry out probes into money laundering, unauthorized financing and other illicit transactions of digital currencies.

"There is a need for the government to cope with the virtual currencies to prevent them from being used as tools for crimes and simple speculative investment," the financial regulator said in a statement.

As part of regulations against illicit transactions of digital currencies, banks will be required to strictly check the personal information of people who work at digital currency exchanges, the FSC said.

If there are suspicious transactions in such bank accounts, lenders will be required to report the transactions to authorities, it said.

If a small money-transfer operator wants to send money overseas using digital currency, the operator will report their daily transfer records to the Bank of Korea, the FSC said.

Besides fears of a bubble and the likelihood of illicit transactions, South Korea's cryptocurrency exchanges are exposed to North Korean cyber attacks.

According to U.S. computer security firm FireEye, North Korea is suspected of stealing money by having launched cyber attacks at least three cryptocurrency exchanges in South Korea since May this year.

"Since May 2017, we have observed North Korean actors target at least three South Korean cryptocurrency exchanges with the suspected intent of stealing funds," FireEye said in a blog post earlier this week.

North Korea is believed to target personal e-mail accounts of employees at digital currency exchanges, "frequently using tax-themed lures and deploying malware linked to North Korean actors suspected to be responsible for intrusions into global banks in 2016," it said.

With international sanctions tightened against North Korea's nuclear and missile programs, the North's cyber attacks against cryptocurrency exchanges are likely to "fund the state or personal coffers of Pyongyang's elite," it said.