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
0

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.”


Undersea gas fires Egypt’s regional energy dreams

Updated 18 November 2018
0

Undersea gas fires Egypt’s regional energy dreams

  • In the past year, gas has started flowing from four major fields off Egypt’s Mediterranean coast
  • Gas production has now hit 184 million cubic meters a day

CAIRO: Egypt is looking to use its vast, newly tapped undersea gas reserves to establish itself as a key energy exporter and revive its flagging economy.
Encouraged by the discovery of huge natural gas fields in the Mediterranean, Cairo has in recent months signed gas deals with neighboring Israel as well as Cyprus and Greece.
Former oil minister Osama Kamal said Egypt has a “plan to become a regional energy hub.”
In the past year, gas has started flowing from four major fields off Egypt’s Mediterranean coast, including the vast Zohr field, inaugurated with great ceremony by President Abdel Fattah El-Sisi.
Discovered in 2015 by Italian energy giant Eni, Zohr is the biggest gas field so far found in Egyptian waters.
The immediate upshot has been that since September, the Arab world’s most populous country has been able to halt imports of liquified natural gas, which last year cost it some $220 million (190 million euros) per month.
Coming after a financial crisis that pushed Cairo in 2016 to take a $12 billion loan from the International Monetary Fund, the gas has been a lifeline.
Egypt’s budget deficit, which hit 10.9 percent of GDP in the financial year 2016-17, has since fallen to 9.8 percent.
Gas production has now hit 184 million cubic meters a day.
Having met its own needs, Cairo is looking to kickstart exports and extend its regional influence.
It has signed deals to import gas from neighboring countries for liquefaction at installations on its Mediterranean coast, ready for re-export to Europe.
In September, Egypt signed a deal with Cyprus to build a pipeline to pump Cypriot gas hundreds of kilometers to Egypt for processing before being exported to Europe.
That came amid tensions between Egypt and Turkey — which has supported the Muslim Brotherhood, seen by Cairo as a terrorist organization, and has troops in breakaway northern Cyprus.
In February, Egypt, the only Arab state apart from Jordan to have a peace deal with Israel, inked an agreement to import gas from the Jewish state’s Tamar and Leviathan reservoirs.
A US-Israeli consortium leading the development of Israel’s offshore gas reserves in September announced it would buy part of a disused pipeline connecting the Israeli coastal city of Ashkelon with the northern Sinai peninsula.
That would bypass a land pipeline across the Sinai that was repeatedly targeted by jihadists in 2011 and 2012.
The $15-billion deal will see some 64 billion cubic meters of gas pumped in from the Israeli fields over 10 years.
Independent news website Mada Masr reported that Egypt’s General Intelligence Service is the majority shareholder in East Gas, which will earn the largest part of the profits from the import of Israeli gas and its resale to the Egyptian state.
Kamal said he sees “no problem” in that, adding that the agency has held a majority stake in the firm since 2003.
“That guarantees the protection of Egyptian interests,” he said.
Ezzat Abdel Aziz, former president of the Egyptian Atomic Energy Agency, said the projects were “of vital importance for Egypt” and would have direct returns for the Egyptian economy.
They “confirm the strategic importance of Egypt and allow it to take advantage of its location between producing countries in the east and consuming countries of the West,” he said.
The Egyptian state is also hoping to rake in billions of dollars in revenues from petro-chemicals.
Its regional energy ambitions are “not limited to the natural gas sector, but also involve major projects in the petroleum and petrochemical sectors,” said former oil minister Kamal.
Minister of Petroleum and Mineral Resources Tarek El Molla recently announced a deal to expand the Midor refinery in the Egyptian capital to boost its output by some 60 percent.
On top of that, the new Mostorod refinery in northern Cairo is set to produce 4.4 million tons of petroleum products a year after it comes online by next May, according to Ahmed Heikal, president of Egyptian investment firm Citadel Capital.
That alone will save the state $2 billion a year on petrochemical imports, which last year cost it some $5.2 billion.
Egypt is also investing in a processing plant on the Red Sea that could produce some four million tons of petro-products a year — as well as creating 3,000 jobs in a country where unemployment is rife.