SEOUL, 13 Dec 2017:
South Korea today said it will consider taxing capital gains from trading of virtual coins.
The government will also ban minors from opening accounts on virtual coin exchanges, and propose a bill to allow only eligible exchanges to operate, the statement said.
To be eligible, exchanges will need to uphold investor protection rules and disclose all bid and offer quotes.
In South Korea, the National Assembly needs to approve government bills on taxes.
The statement follows an emergency policy meeting held to discuss cryptocurrencies.
The move comes as bitcoin hit another all-time peak yesterday – two days after the launch of the first ever bitcoin futures on a US exchange and ahead of the start of another futures contract next week, as investors grew optimistic that the US$20,000-mark is within reach.
Chicago-based derivatives exchange Cboe Global Markets launched bitcoin futures on Sunday – enabling investors to get exposure to the currency via a large, regulated exchange.
The CME Group is expected to launch its futures contract on Sunday, Dec 17.
“We’re going to see bitcoin emerge as a payment network,” said Trevor Koverko, chief executive officer of Polymath, a securities token platform.
“Currently bitcoin is being used as a speculative asset and store of value. But as scaling solutions…emerge, bitcoin’s utility dramatically increases along with its price.”
Bitcoin, the world’s biggest and best-known cryptocurrency, was quoted at US$17,310 on the Luxembourg-based Bitstamp exchange, up 5.1% on the day. Earlier yesterday, bitcoin hit a record high of US$17,428.42 – registering a roughly 20-fold increase in its price for the year as it drew in millions of new investors.
A Reuters technical analysis that measures the ups and downs in trading prices, known as waves, showed bullish momentum for bitcoin.
The technical analysis suggests an extension of a wave, which could mean that bitcoin would easily surge above the psychologically important level of US$20,000, according to the Reuters analysis.
“It’s remarkable how back in November US$10,000 seemed like a psychological end-of-year target,” said Lukman Otunuga, research analyst at FXTM. “With the current gravity-defying bullish momentum, it may be no surprise if bitcoin concludes 2017 on US$20,000.”
“The trading volume was huge yesterday as bitcoin price fluctuated in a wide range over the weekend,” said Park Nok-sun, a cryptocurrency analyst at NH Investment and Securities in Seoul.
“Now that the exchange price is relatively calm, it is obvious for futures trading volume to fall.”
While market participants are still heavily divided over the digital currency’s utility, value and safety, they expect the futures contract to offer a legitimate means for institutions to bet on bitcoin. Some investors even expect the futures will offer markets an easier means to take short positions on the cryptocurrency.
The fascination with virtual currencies feels more like a “speculative mania”, the head of Australia’s central bank said today.
Wild gyrations of 10-30% in a single day is quite common in bitcoin, which was last up 1.5% at US$16,900.
But Reserve Bank of Australia (RBA) governor Philip Lowe said it was hard to see bitcoins being used for everyday transactions.
“When thought of purely as a payment instrument, it seems more likely to be attractive to those who want to make transactions in the black or illegal economy, rather than everyday transactions.
“The value of bitcoin is very volatile, the number of payments that can currently be handled is very low, there are governance problems, the transaction cost involved in making a payment with bitcoin is very high and the estimates of the electricity used in the process of mining the coins are staggering.”
The comments come days after his New Zealand counterpart said bitcoin appeared to be a “classic case” of a bubble, and cast doubt on its future.
“Bitcoin is to me very much like gold,” Grant Spencer, acting governor of the Reserve Bank of New Zealand, told a local television programme. “It’s mined, it has a fixed quantity and the price is very volatile.”
“I think a cryptocurrency that has a more stable value will be the sort of cryptocurrency that is more useful for the future.
“I think they are part of the future. But not the sort that we see in bitcoin.”
Lowe noted the form that money takes has come a long way – from clam shells, stones and even rum – to metal coins and paper banknotes, and expects this innovation to continue.
The RBA itself is open to the idea of issuing a new form of digital money, perhaps using distributed ledger technology on which bitcoins function.
But the case for doing that has not yet been established, Lowe said, adding the central bank has no immediate plans to issue an electronic form of Australian dollar banknotes, or eAUDs.
“The history of private issuance is one of periodic panic and instability. In times of uncertainty and stress, people don’t want to hold privately issued fiat money. This is one reason why today physical banknotes are backed by central banks.”
The RBA is in close contact with its peers in other countries about introducing digital money.
While a privately issued eAUD is conceivable, history has shown there are “significant difficulties and dangers” associated with privately issued fiat money, Lowe said.
“Few see electronic banknotes on the horizon.”
– Reuters