South Korea yesterday said it might tax capital gains from cryptocurrency trading as global regulators worried about a bubble, with Australia’s central bank chief warning of a “speculative mania” that has seen the digital asset making rip-roaring gains.
As bitcoin futures made their world debut on a US stock exchange this week, policymakers have been forced to contend with cryptocurrencies becoming more of a mainstream play and the need to regulate them.
The world’s biggest and best known cryptocurrency, bitcoin, surged past US$17,000 to all-time highs this week, marking an almost dizzying 20-fold rise this year and feeding fears of a bubble.
Photo: AP
Reserve Bank of Australia Governor Philip Lowe yesterday warned that the fascination with the assets felt like a “speculative mania.”
The comments come days after his New Zealand counterpart said bitcoin appeared to be a “classic case” of a bubble, and cast doubt on its future.
The chairman of the US Securities and Exchange Commission on Monday warned that trading and public offerings in the emerging asset class might be in violation of federal securities law.
Digital currencies are very popular across Asia, with many retail investors giving up their daily jobs to trade them full time in countries such as Japan and South Korea, which together make up for more than half the global trading volumes by some estimates.
However, the possibility of major losses if the bubble bursts and wild gyrations of 10 percent to 30 percent in a single day have instilled a sense of urgency among policymakers to come up with a regulatory response.
In Seoul, after an emergency meeting yesterday, the South Korean government said it would consider taxing capital gains from trading of virtual coins and would also ban minors from opening accounts on exchanges, according to a statement obtained by reporters ahead of its official release.
To be eligible, exchanges in South Korea would need to uphold investor protection rules and disclose all bid and offer quotes. The measures need legislative approval.
Seoul would maintain a current ban on all financial institutions dealing virtual currencies.
“Regulations in [South] Korea will not have a negative effect,” said Thomas Glucksmann, head of marketing at Hong Kong-based exchange Gatecoin, adding that on the contrary, “licensing brings certainty, which encourages already regulated entities ... to get involved in addition to skeptical retail investors.”
In an interview with Reuters on Tuesday, the Seoul-based operator of the world’s busiest virtual currency exchange, Bithumb, said it would fully comply with potential regulations from the South Korean government and adequately capitalize itself to protect its clients.
Elsewhere in Asia, China in September ordered Beijing-based cryptocurrency exchanges to stop trading and immediately notify users of their closure, in a move aimed at limiting risks in the speculative market.
Economists and cryptocurrency advocates have said the move was also intended to close an avenue used to evade Beijing’s capital controls.
Japan requires cryptocurrency operators to register with the government. The Japanese government in April granted cryptocurrencies legal status as a means of settlement and in September officially recognized 11 digital currency exchanges.
Bitcoin yesterday dropped to US$16,575, down 0.5 percent on the day, after losing US$152 from its previous close. On Bithumb, it was down 2 percent at US$17,083.
Bitcoin futures maturing in January on Cboe Global Markets Inc’s Cboe Futures Exchange were US$17,700, having opened at US$18,010.
Bitcoin-related shares in Seoul slumped in early trade on news of the government’s emergency meeting, before rebounding as the statement did not mention harsh restrictions.
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