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Financial regulator warns of bitcoin bubble

2017/12/28 10:24

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SEOUL, Dec. 28 (Yonhap) -- The chief of South Korea's financial watchdog has warned against a bitcoin bubble, saying the price of the virtual currency may plunge in the future.

"I bet the bubble in bitcoin will burst later," Choe Heung-sik, governor of the Financial Supervisory Service (FSS), told a year-end meeting with journalists Wednesday. "Companies existed during South Korea's IT bubble in the early 2000s, but that is not the case for bitcoin."

   The regulator hinted that South Korea has no solution to the problem of bitcoin and other digital currencies and said governments across the globe appear to be in the same situation.

Asked about a government push to tax bitcoin transactions, Choe said that doesn't mean South Korea's financial authorities have plans to regularize cryptocurrencies.

He also drew the line at the possibility of establishing an official cryptocurrency exchange in Asia's fourth-largest economy. "It is an issue to be reviewed carefully," he said.

Choe Heung-sik, governor of the Financial Supervisory Service (Yonhap) Choe Heung-sik, governor of the Financial Supervisory Service (Yonhap)

Virtual currencies, such as bitcoin and ethereum, have rapidly gained popularity in recent years among South Korean investors hoping to make quick money. South Korea is home to one of the world's biggest private bitcoin exchanges, with about 1 million people estimated to have some of the best-known digital currency.

According to Bithumb, the largest bitcoin and ethereum digital currency exchange in South Korea, its virtual currency turnover soared to 56.3 trillion won (US$52.4 billion) in November from some 300 billion won in January.

Early this month, Choi Jong-ku, chairman of the Financial Services Commission (FSC), said the government is mapping out measures to restrict virtual currency transactions to some extent, including an all-out ban that would minimize possible side effects and cut speculative investment. The FSC is the decision-making body of the FSS.

Despite a boom in cryptocurrency transactions, their exchanges go largely unregulated in South Korea, as they are not recognized as financial products. There are also no rules for protecting virtual currency investors.

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