Korea's Crypto Crackdown Talk Draws Backlash From Users and Politicians

More than 100,000 South Korea residents have signed petitions asking the government there to step back from any plans to close the country's cryptocurrency exchanges.

Earlier this week, the South Korean Justice Ministry announced that it was preparing legislation to close the country's online exchanges amid a speculative boom in cryptocurrencies. That shot across the bow was paired with the news that tax authorities were investigating at least some of the exchanges in Korea, and in the hours to come.

Yet the proposal drew swift pushback from within the South Korean government – the president's office, in particular, said no move is "finalized" as of yet – as well as cryptocurrency supporters and traders in the country who cried foul as the statements sparked a fall in cryptocurrency prices.

The public backlash against the proposed move appears to be accelerating. On the Korean president's Blue House website, more than 4,000 petitions have been filed related to "virtual currencies" since Jan. 10.

One petition asking the Minister of Justice to step down in light of the move received more than 30,000 signatures on its own. According to Reuters, one petition alone has attracted more than 100,000 signatures and the website itself became inaccessible at one point due to excessive traffic.

Comments on the government's website included a petition from a user who claimed to have lost money due to the Justice Ministry's saber-rattling.

Another petition compared cryptocurrency trading with the stock market, but claimed the latter is much more speculative.

Yet another petition struck a supportive note on the development of new rules but called for the government to consult with the wider cryptocurrency community before implementing any such rules.

Opposition pushback

Other members of the Korean political scene are reportedly crying foul as well.

A new report from Korean daily newspaper The Hankyoreh states that leaders of several opposition parties are moving to criticize what they deem a unilateral crackdown without any discussion or debate.

One opposition lawmaker said the ban was not a government position, but rather one that the Ministry of Justice and, possibly the president, hold themselves.

The lawmaker continued (according to a translated statement):

"The government announcement should be based on detailed reviews and coordination. If there is a problem, we should warn and prepare in advance."

Path toward regulation

In recent months, the government has made efforts to tamp down on what it refers to as speculation surrounding cryptocurrencies.

These efforts included new regulations for banks conducting transactions with cryptocurrency exchanges. On Jan. 8, regulators inspected six banks to ensure compliance with the new regulations, which included strict know-your-customer identification rules, among other measures.

However, rather than comply with the new rules, some banks said they would simply cease trading with cryptocurrency exchanges altogether, according to the Korea Times.

South Korea’s largest bank, Shinhan Bank, said on Friday that it would be closing down the virtual currency accounts it offers in order to comply with new regulations surrounding their use.

An official from Shinhan said the bank had initially built a system to comply with the new regulations before deciding to just de-risk.

"We've developed a system to introduce identifying virtual [currency] account customers in accordance with the government's efforts to curb the cryptocurrency craze. However, we decided to scrap the service enabling the trade of digital tokens which has become a serious social issue," the representative told the publication.

South Korea flag and physical bitcoin image via Shutterstock