Bitcoin will be recognized and regulated as a commodity rather than a currency, the head of Korea’s central bank told lawmakers at a parliamentary audit.
Speaking at the National Assembly audit of the Bank of Korea (BOK), the country’s central bank, BOK governor Lee Joo-yeol was reportedly asked “is it possible to see virtual money as a currency?”. According to Yonhap News, Lee responded to state “it is difficult to look at [virtual currencies] as money by the example [definition] of Bank of International Settlements (BIS). The BIS is an international financial organization based in Switzerland and owned by 60-member central banks around the world, seen as a ‘bank of central banks’.
Lee also expressed the central bank’s current official stance on the regulation of cryptocurrencies, at a time when bills are being prepared to regulate – in effect legalize – cryptocurrencies like bitcoin and ethereum.
The central bank official stated:
Regulation (of virtual currencies) is appropriate because it is regarded as a commodity. It [cannot be] regulated at the level of a currency.
Still, the central bank isn’t looking at enforcing regulations presently, Lee revealed. “It is not a situation for the Bank of Korea to take action at present.”
In November 2016, South Korean established a digital currency task force – a group comprising of the country’s central bank, financial and securities regulators and authorities alongside digital currency companies – to focus on regulatory and licensing parameters for bitcoin exchanges and wider regulations for the digital currency industry. Despite monthly meetings to this end, the task force did not much progress with a failure to reach a consensus toward a unified call on regulations. As CCN reported earlier in June, the participants ‘failed to agree on whether virtual currencies should be included in systems right now and how the systems will work if they are included.”
The Financial Supervisory Service (FSS), the country’s financial regulator, made the notable move of banning initial coin offerings (ICOs) following a meeting of the task force, leading to fears of a crackdown on the local cryptocurrency trading market a-la China. Undeterred, South Korea remains among the world’s largest trading markets for bitcoin.
The central bank was also criticized for its “poor” research on virtual currencies during the audit. Lee asserted that the bank will do more to research virtual currencies.
The central bank chief stated:
We also refer to a lot of virtual currency research in Sweden and other countries.” The Bank of Korea will also put more emphasis on virtual currency research… The possibility that the central bank’s digital money will be issued in the near future is likely to become a means of payment specialized for interbank transactions (domestic transactions) or central bank transactions (domestic transactions).
Bank of Korea image from Shutterstock.