From Prohibition to Anti-Fraud: Seoul and Its Fight Against Cryptocurrency

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In December 2017, the South Korean government developed new rules on the trade of virtual currencies. Now, a petition that was started on January 16th, and that has already accumulated over 280,000 signatures, has been addressed to the Blue House to alleviate pressure and dissuade the government from passing legislation.

Coming into effect on January 30th, 2018, the new regulations have provoked public outcry and the legislation is now being appealed to the Supreme Court as being unconstitutional.

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According to Lee Nak-yon, South Korea’s Prime Minister, “Cryptocurrencies could corrupt our nation’s youth.” His statement clearly identifies the feelings held by the government on virtual currencies.

However, in South Korea, cryptocurrency had been given a warm welcome and has become one of the major hubs with about 20% of all cryptographic exchanges. Also, the price of cryptocurrency is about 20%-30% higher than in the rest of the world due to its high demand. It is estimated that about 3 million South Koreans have invested into the market.



The massive influx of South Koreans has pushed the country’s central bank to ask the government to put a ban on cryptocurrency trades during banking hours. To calm to frenzy, the government has also adopted other measures to restrict cryptographic activities. These include the requirement that traders must associate their real names to their accounts, the prohibition of mining and banning foreigners and foreign institutions in domestic trade.

These restrictive measures have had a clear impact on the market, which can be seen by the decline in prices since the beginning of the year.

In response to the government’s restrictions, a petition has been launched and the decisions are now being appealed to the Supreme Court.

Petitioning the Government

According to Anguk Law, the new restrictions infringe upon personal property rights and are unconstitutional. “The regulation of commerce by a country’s government without any legal basis is a violation of property rights.” An appeal has since been called for by the cabinet to authorize the trade of cryptocurrency against fiat currency or other financial assets.

According to Jeong Hee-chan, since cryptocurrencies are decentralized and are considered property, not legal securities, their trade for regular currency should be allowed.

The Supreme Court now has 180 days to make a ruling on the subject, however, a decision is expected before the end of this year’s second quarter. If the Court rules in favor of Anguk Law, any regulations that have been put in place will be nullified.

Still, Hee-chan believes that regulating the market is a necessary evil, but only after obtaining social consensus and enacted proper laws.

Banning the Ban

The petition, which called to remove the ban on cryptocurrency, has caused a massive influx of traffic to the government’s website and temporarily caused the site to be shut down. It has also received support from the of the biggest exporters in the country, Samsung, and LG.

This all happened on the same website where Hong Nam-ki, the government Minister of Government Action, was reassuring the public just last week. Which, came after his government’s justice department launched the ban on cryptocurrency in January.

“The government is filled with diverse opinions on whether cryptocurrency should be deemed illegal or if they should be used to support the country’s financial system.” Said Nam-ki.

For many analysts, cryptocurrency presents a way to save the Won (the country’s national currency), which the government was trying to abandon since only 10% of cryptographic exchanges are made with it.

Echoing the government’s sentiment, Nam-ki said: “The primary goal here is to prevent any delinquent behavior on the market, all while encouraging the use and development of Blockchain technology.”

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