The government has taken emergency steps to put the brakes on frenzied speculation as well as scams in the little understood blockchain and cryptocurrency sectors.
Authorities decided to prohibit financial institutions from holding or purchasing virtual currencies as well as from making equity investments.
Wednesday's meeting brought together vice minister-level officials from the ministries of justice, finance, science, and ICT, as well as the Financial Services Commission and the Korea Communications Commission.
Together, they decided to ban minors from opening accounts with cryptocurrency exchanges. The government will order exchanges to confirm the identity of users in the process of depositing and withdrawing Bitcoin and other virtual currencies.
The government warned it was considering banning cryptocurrency dealings outright if they don’t meet certain conditions, including protecting investors and securing transparency in transactions. Officials will also step up the clampdown against related crimes.
The moves are a precaution against rampant speculation in cryptocurrencies, particularly Bitcoin, whose prices have even plunged 40 percent in a day after reaching high levels.
Exchanges report unbridled interest in Bitcoin purchases by clients ranging from university students to retirees. The exuberant interest has led to reports of customer scamming by fraudulent exchanges, which the government promises to sternly punish.
Officials also plan to form a task force to decide whether and how cryptocurrency trading gains should be taxed.
Financial Services Commission Chairman Choi Jong-ku has said that he doesn't see Bitcoin transactions as financial deals and they are not institutionalized transactions. He said futures trading of such currencies will not be allowed.
Prime Minister Lee Nak-yon also called for measures, noting that students were also jumping on the bandwagon and being exploited in drug trading and pyramid schemes.
Bitcoin is a virtual currency that exists in the form of digital codes. If the speculative bubble bursts, it can have enormous ramifications. But some experts say regulation is the not the solution to all of the issues with cryptocurrencies.
The technology behind Bitcoin known as blockchain is believed to be a game changer with implications of extensive use across different industries. So in terms of technology, some say Bitcoin trading should be encouraged.
The government said it will address the side effects of speculative trading but also exert balanced policy efforts not to hinder development of related technologies.