South Korea considers cryptocurrency tax as regulators grapple with ‘speculative mania’

Digital currencies are very popular across Asia, with many retail investors giving up their daily jobs to trade them full time in countries such as Japan and South Korea. (Reuters)
Updated 13 December 2017
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South Korea considers cryptocurrency tax as regulators grapple with ‘speculative mania’

SEOUL: South Korea said on Wednesday it may tax capital gains from cryptocurrecy trading as global regulators worried about a bubble, with Australia’s central bank chief warning of a ‘speculative mania” that has seen the digital asset making rip-roaring gains.
As bitcoin futures made their world debut on a US stock exchange this week, policy makers have been forced to contend with cryptocurrencies becoming more of a mainstream play and the need to regulate them.
The world’s biggest and best known cryptocurrency, bitcoin , surged past $17,000 (SR63,750) to new all-time highs this week, marking an almost dizzying 20-fold rise this year and feeding fears of a bubble.
Australia’s central bank governor Philip Lowe warned on Wednesday the fascination with the assets felt like a “speculative mania.”
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. The chairman of the US Securities and Exchange Commission (SEC) on Monday warned trading and public offerings in the emerging asset class may be in violation of federal securities law.
Digital currencies are very popular across Asia, with many retail investors giving up their daily jobs to trade them full time in countries such as Japan and South Korea, which together make up for more than half the global trading volumes by some estimates.
But the possibility of major losses if the bubble bursts and wild gyrations of 10-30 percent in a single day have instilled a sense of urgency among policymakers to come up with a regulatory response.
In Seoul, after an emergency meeting on Wednesday, South Korea’s government said it will consider taxing capital gains from trading of virtual coins and will also ban minors from opening accounts on exchanges, according to a statement obtained by Reuters ahead of its official release.
To be eligible, exchanges in South Korea will need to uphold investor protection rules and disclose all bid and offer quotes.
The measures need parliamentary approval. Seoul will maintain a current ban on all financial institutions dealing virtual currencies.
“The regulations in Korea will not have a negative effect,” said Thomas Glucksmann, head of marketing at Hong Kong-based exchange Gatecoin, adding that on the contrary, “licensing brings certainty, which encourages already regulated entities ... to get involved in addition to skeptical retail investors.”
In an interview with Reuters on Tuesday, the Seoul-based operator of the world’s busiest virtual currency exchange Bithumb, said it will fully comply with potential regulations from the South Korean government and adequately capitalize itself to protect its clients.
Elsewhere in Asia, China in September ordered Beijing-based cryptocurrency exchanges to stop trading and immediately notify users of their closure, in a move aimed at limiting risks in the speculative market. Economists and cryptocurrency advocates say the move was also intended to close an avenue used to evade Beijing’s capital controls.
Japan requires crypto-currency operators to register with the government. The Japanese government in April granted cryptocurrencies legal status as a means of settlement and in September officially recognized 11 digital currencies exchanges.
Bitcoin dropped to $16,575 on Wednesday, down 0.5 percent on the day, after losing $152 from its previous close. On Bithumb, it was down 2 percent at $17,083. Bitcoin futures maturing in January on the Cboe Global Markets’s Cboe Futures Exchange were $17,700, having opened at $18,010.
Bitcoin-related shares in Seoul slumped in early trade on news of the government’s emergency meeting, before rebounding as the statement did not mention harsh restrictions. Vidente and Omnitel, which hold stakes of Bithumb, were up 4 percent and 7 percent, respectively. Bitcoin mining-related company JCH Systems were up 1 percent.
While crypto trading has attracted anyone from hedge funds and finance professionals to housewives and college students, it is yet to lure institutional asset managers whose mandates require them to make long-term investments which do not chime with highly-volatile digital currencies, whose fundamental values are also difficult to define.
“BlackRock’s view is that this isn’t a financial asset that we would trade in terms of equities or fixed income instruments,” said Belinda Boa, head of active investments for Asia Pacific, BlackRock.
“There are questions around the store of value and the fact that actually for our clients we’re looking at longer term investments.”


Oil prices inch up as US crude stocks drop, Iran sanctions weigh

Updated 8 min 15 sec ago
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Oil prices inch up as US crude stocks drop, Iran sanctions weigh

  • US crude inventories fell by 5.2 million barrels in the week to August 17 to 405.6 million barrels
  • ‘The Iran issue continues to occupy traders’ minds’
SEOUL: Oil markets rose on Wednesday on a drop in US crude inventories and a weaker dollar, while concerns about a potential shortfall in Iranian supply from November due to US sanctions also buoyed prices.
Brent crude oil futures were at $72.90 per barrel at 0653 GMT, up 27 cents, or 0.37 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were up 27 cents, or 0.41 percent, at $66.11 per barrel.
US crude inventories fell by 5.2 million barrels in the week to Aug. 17 to 405.6 million barrels, ahead of analyst forecasts for a fall of 1.5 million barrels, according to data from industry group the American Petroleum Institute.
Official data from the US Energy Information Administration (EIA) is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.
“Investors are also confident that (official) inventories in the United States will decrease this week,” ANZ Bank said in a note.
Signs of slowing US crude output growth and a weaker US dollar also provided some support to oil prices, said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul.
The US dollar index against a basket of six major currencies eased on Wednesday to 95.211 after losing 0.7 percent the previous day, weighed down by US President Trump’s comments on monetary policy.
A weaker US dollar makes oil, which is priced in dollars, less expensive for buyers in other currencies.
The EIA cut its 2018 US crude production growth forecast on Aug. 7 to 10.68 million barrels per day (bpd) from 10.79 million bpd amid lower crude prices.
Concerns also remain over how much oil will be removed from global markets by renewed sanctions on Iran, despite worries that demand-growth could weaken amid a trade dispute between the United States and China, the world’s two biggest economies.
“The Iran issue continues to occupy traders’ minds,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC) and OPEC’s third-largest oil producer, said earlier this week no other OPEC member should be allowed to take over its share of oil exports.
Meanwhile, a Chinese trade delegation is in Washington to discuss the trade dispute with the US side. But signs of a thaw were unlikely as US President Donald Trump told Reuters in an interview on Monday that he did not expect much progress.