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What Aussies can learn from South Korea's crypto-regulation
Earlier this month mainstream headlines bellowed that the South Korean Ministry of Justice was going to “ban cryptocurrency exchanges”. Fortunately, everyone now seems to have caught their breath, realising that this wasn’t actually true, writes Bitcoin Trader's Ben Hagemann.
What Aussies can learn from South Korea's crypto-regulation
Earlier this month mainstream headlines bellowed that the South Korean Ministry of Justice was going to “ban cryptocurrency exchanges”. Fortunately, everyone now seems to have caught their breath, realising that this wasn’t actually true, writes Bitcoin Trader's Ben Hagemann.
What was true, however, was the fact that many people in South Korea were quite upset about what they read in the papers. Within hours the website of the presidential office was bombarded with something in the order of 4,000 petitions; one petition alone bore more than 200,000 signatures. The people had spoken, and President Moon Jae-in heard them, loud and clear, trying to calm the situation by reassuring cryptocurrency investors that nothing had been finalised.
Those in the crypto world who were caught off guard by the announcement appeared spooked: the market dropped around 14 per cent, but most breathed a sigh of relief when they realised the story had been blown out of proportion by overenthusiastic journalists and crypto sceptics, who revelled in the results of some classic FUD. That wasn’t going to stop hardline crypto investors however, who were ready to buy in the dip and tuck a few bargains away in their cold wallet portfolios.
Leaving aside the whys and wherefores of a sensationalist fourth estate, South Korea is merely regulating a new business sector, as good government should. The government now clarifies that it will ban anonymous cryptocurrency accounts, and crypto exchanges will be more closely monitored.
The changes are due to come into effect on 30 January this year, and that’s a great move for the South Korean markets. Preventing anonymous accounts from trading on the exchanges will bring greater transparency and accountability to the sector. But for any in Seoul wishing to continue flying under the radar legally, they may have to head on down to the Seven Luck Casino to make their “investments” …Gangnam-style.
In Australia, similar regulations to those being implemented by the South Korean government will come into effect in April this year. Anti-Money Laundering (AML) and Know-Your-Client (KYC) obligations for crypto exchanges will be regulated and monitored by AUSTRAC, just as they are on the ASX.
Indeed, there are many regulations that apply to the purchase and trade of cryptocurrency in Australia. Signing up to a crypto exchange requires a few compulsory ID checks, by supplying a copy of either passport or driver's licence, and in some cases new exchange users must supply a current photograph bearing proof of the date it was taken, together with a signed statement.
Bitcoin Trader already adheres to AML and KYC, and in line with the Privacy Act also applies a Clean Desk Policy, as would any financial institution. Minimal storage of client details guarantees a high level of privacy and security.
“A failure to protect personal information properly can increase the likelihood of a data breach,” according to Anna Johnston, director of privacy consultants Salinger Privacy. She explains that from February 2018, data breaches that could result in serious harm to a client must be brought to the attention of the privacy commissioner, as well as all affected individuals. Fines for non-compliance range up to $2.1 million.
There are many in the press making wild claims about the absence of regulation in the cryptocurrency sector, and at best such statements are simply inaccurate. When looking for sound information about cryptocurrency investment, it’s unfortunate but the mainstream press is simply not the correct source. It’s absolutely essential to read news reports with a critical eye, and no matter which side of the fence they come from, extreme opinions should be taken with a grain of salt.
But getting back to the South Korean story… was it really a vague and premature announcement that caused a 14 per cent drop in the price of Bitcoin, and corresponding falls across the alt-coins? Astute crypto-sector pundits noted the next day that CoinMarketCap had decided to stop publishing price averages from three major Korean crypto exchanges, because of their “extreme divergence in prices from the rest of the world”. With premiums of up to 30 per cent on all coins in the Korean exchanges, this was distorting the market value. However, the decision to remove the Korean exchange prices was made without a formal announcement, so crypto-coins appeared to tank on their own. Skittish investors who thought they’d spied a sell-off then spiralled into an ACTUAL sell-off… and the rest is history.
This small but significant episode has certainly sparked some important conversations. Everyday people, curious about investing in this new and exciting sector, are talking about it and searching for information. They can see the level of fear that certain events relating to decentralised digital currency can induce in traditional investment markets. The need for appropriate legislation to protect crypto-exchanges, traders and investors is very clear – but let’s also be very clear, and honest, about the fact that here in Australia cryptocurrency is becoming a very well-regulated asset class.
Ben Hagemann is content manager at Bitcoin Trader.
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