A group of lawyers has urged the government to promptly institute measures to help regulate the blockchain business here.
They said the current, long-extended inaction only hampers development of the financial industry, while more fall victim to cryptocurrency-related fraud due to a lack of credible information.
In a statement released Thursday, the Korean Bar Association (KBA) said the government should join the global wave of efforts to come up with an institutional framework for the unconventional method of investment.
"Japan, Estonia and Malta have nearly concluded establishing relevant legal frameworks, while similar efforts are ongoing in France, Russia and Gibraltar. The U.S., Singapore and Switzerland have yet to legislate the business, but financial regulators there have issued guidelines as part of broader efforts to regulate the industry," the lawyers said in the statement.
|Rep. Song Hee-kyoung of the main opposition Liberty Korea Party speaks at the beginning of a meeting organized by members of the Korean Bar Association to urge the government to institute measures to help settle the blockchain business at the National Assembly, Thursday. To her right is Korean Bar Association President Kim Hyun. Yonhap|
They recommended detailed guidelines be issued concerning cryptocurrency exchanges including minimum requirements for those who seek to run exchanges, a ban on insider trading and preventative measures to protect exchange users.
As for issues concerning initial coin offerings (ICOs), the government can regulate securitized tokens with the existing laws on securities, they suggested.
An ICO is a type of funding in which quantities of cryptocurrencies are sold in the form of tokens, also called coins, to speculators or investors.
"In order to prevent possible losses to Koreans who took part in foreign entities-led ICOs, the government should require foreign entities to submit a paper prior to the procedure," the KBA said.
Trade and remittance of cryptocurrencies between Korea and overseas countries should be allowed, they added, pointing out the status quo is far from desirable.
The Bank of Korea and other commercial banks in the country do not recognize financial transactions involving cryptocurrency, they noted. They also deny transactions on remittance of currencies in the form of investment to blockchain-related entities.
"While the measures are in line with the current government's indecisive stance, they have no legal basis, a reason why clearer guidelines should be issued promptly as to what extent the current law governing foreign currency is applied concerning the cryptocurrencies," the association noted.
The government should allow certified investment management entities to exercise discretion for them to determine investment viability through possible vehicles such as private equity funds (PEFs), it noted.
"Rather than imposing an outright ban, the government should allow competent certified entities to pursue the collective investment scheme in various equity securities where they can make strategic moves."
A lawyer specialized in the industry said the financial regulator has no time to simply "observe" anymore.
"The government has yet to come up with any tangible measures primarily out of fear of unwanted byproducts based on excessive and inept government intervention, but not taking any action will only result in greater failure in the future," said Jung Ho-seok, head of the KBA blockchain taskforce.