The government of South Korea is on the brink of taking yet another step to ensure that cryptocurrencies thrive in the country, as one of the less-explored aspects of these assets is set to begin operating there.
Earlier today, Business Korea reported that the South Korean Presidential Committee on the Fourth Industrial Revolution (PCFIR) has officially passed a recommendation to the government to allow financial institutions in the country to launch Bitcoin derivatives for institutional investors to diversify their portfolios. According to the report, the government is hoping to institutionalize cryptocurrencies, and it sees Bitcoin derivatives as an important component of that objective.
South Korean Presidential Commission Wants to Bring Crypto Into Mainstream Finance: Financial institutions should be allowed to launch cryptocurrency products, such as derivatives,… https://t.co/4pRyPNX5um #Policy_regulation #Derivatives #Exchanges #South_Korea #Regulation pic.twitter.com/U0pEEfddtx
— Erich Strasser ???? (@erich_strasser) January 6, 2020
Bitcoin as an Investment Vehicle
The committee was formed back in 2017 by presidential decree, and oversees the formulation of various policies, while also advising the government on how best to integrate new and emerging technologies across the world. In an age where tech is rapidly changing, the PFIR has been one of the most important advisors to the South Korean government.
As Business Korea explained, the committee also suggested that the financial sector in the country be allowed to develop and launch a custody solution, which will reduce the reliance on local asset custodians as far as handling digital assets are concerned. It also advised the government to look into developing business guidelines and licenses for crypto exchanges to operate in the country, as well as to integrate crypto asset-related products into the financial ecosystem.
“As of May 2019, daily crypto-asset trade hit more than 80 trillion won (over $68 billion) in the world, so it is no longer possible to stop crypto-asset trade. […] The Korean government has to gradually allow institutional investors to deal in crypto-assets and promote over the counter (OTC) desks dedicated to institutional investors’ trade,” a draft of its recommendations reportedly reads.
South Korea Makes Bold Moves for Crypto
The need for cryptocurrency derivatives has been widely covered for a while now, as reports suggested last year that institutional appetite for cryptocurrencies has drastically increased. Exchange-traded funds (ETFs), futures contracts, and much more are tools that show Bitcoin as a viable investment tool, and countries have started to look into how they could harness this to improve both local and foreign investment.
In 17 cities across South Korea authorities are looking to incentivise commuters to start cycling to work and reward them with crypto tokens. Currently only 2% ofSouth Korean commuters cycle.
— Jasmine Birtles (@Jasmine) August 12, 2019
Clearance for Bitcoin derivatives is also a great way for the South Korean government to improve the legal standing of cryptocurrencies in the country generally. In November 2019, local news source Korea JoongAng Daily reported that the government was making progress with providing a legal basis for cryptocurrencies in the country, with a bill that would effectively categorize virtual currencies as digital assets and bring clarity to the digital asset space in the country.
Per the report, the bill had gotten the green light from the National Assembly’s national policy committee, and would need approval from the judicial committee to move forward. If approved, it could be integrated into the country’s laws as early as this year.