Financial institutions in South Korea may soon be able to launch Bitcoin derivatives and other crypto-based products as part of the country’s effort to make crypto a legal asset.
The South Korean presidential office of the 4th industrial revolution Commission published a document advising the Korean government on some policies they could use as a roadmap to institutionalize cryptocurrencies, according to Business Korea, on Monday.
The Commission suggested that the Bitcoin should be listed directly on the Korea Exchange (KRX) and that the government should emulate the US financial authorities by encouraging commercial organizations to create crypto-based investment vehicles for institutional investors, including Bitcoin derivatives.
They recommended that the government could start by introducing guidelines or licenses for cryptocurrency exchanges before integrating crypto-based products into the financial sector in the medium and long-term, just like the US and Swiss monetary authorities.
“As of May 2019, daily crypto-asset trade hit more than 80 trillion won (about US$69 billion) in the world, so it is no longer possible to stop crypto-asset trade,” the Commission said.
The Commission also believes that a Korean cryptocurrency custody solution in the financial sector would prevent the country from its sole reliance on foreign custodians for digital assets.
“Participants in the traditional capital market such as securities firms and banks should develop and introduce domestic custody solutions to handle crypto assets so that the Korean crypto-asset custody market will not depend on foreign countries,” the Commission added.
South Korea and Crypto Tax
Last week, the South Korean Ministry of Finance and Strategy announced that local crypto traders in the country are currently not obligated to pay tax on the profit they generated from crypto trading because of the loophole in the existing tax laws.
The Ministry noted that they are currently reviewing the crypto tax laws of other countries and looking for how they will classify crypto assets as taxable income. However, for cryptocurrency to become a taxable event, South Korea first needs to clarify some issues such as giving crypto a clear definition as well as a legal status.