FSC head’s Bitcoin warning backfires, prompts calls to resign

A warning from the head of the nation’s financial regulator about the risks of investing in crypto assets has sparked criticism from traders of virtual coins, who reject his opinion that digital tokens are speculative tools.

Financial Services Commission Chairman Eun Sung-soo on Thursday voiced concern about the recent crypto frenzy, saying “cryptocurrencies, which have no intrinsic value, are not a real currency,” during a meeting of the National Assembly’s National Policy Committee.

Boosted by excess liquidity amid the COVID-19 pandemic, the price of a bitcoin in the country topped 80 million won ($71,800) for the first time in mid-April.

Eun said the government could not protect cryptocurrency investors because digital tokens were speculative tools.

“Adults are responsible for leading young people who are going the wrong way. It’s too risky to trade them considering their high volatility in prices.”
But Eun’s comment infuriated some crypto traders hoping to hit the jackpot.

As of Monday afternoon, nearly 130,000 South Koreans had signed an online petition calling for the FSC chief to resign.

An office worker in his 30s filed the petition on the Cheong Wa Dae website on Friday. Any petition signed by more than 200,000 people within 30 days of being posted requires an official response from Cheong Wa Dae.

A growing number of crypto traders have voiced criticism of the financial authorities, accusing them of double standards on investments. 

“Adults in their 40s and 50s, including the financial authorities, have accumulated wealth mostly through speculative real estate investment. However, the authorities poured out a series of property regulations and deprived young people of chances to earn money. Now they are trying to ban our crypto investments, calling virtual currencies speculative,” the petitioner said.

Last week, Eun also warned that an estimated 200 crypto service providers in the country could be shut down in September unless they gain approval from the state-run Korean Financial Intelligence Unit under the FSC. 

To gain approval to operate, all virtual asset service providers must acquire verifiable accounts in their real names from local banks in accordance with the revised Act on Reporting and Using Specified Financial Transaction Information, which took effect in March. Local banks are obligated to evaluate coin operators’ financial stability and the soundness of their business models before providing the bank accounts. Only four exchanges -- Upbit, Bithumb, CoinOne and Korbit -- have access to such accounts so far. 

Amid the growing controversy over the FSC chief’s remarks, the price of Bitcoin, the largest cryptocurrency, dropped 6.61 percent Friday from a day earlier to 50.06 million won, according to local crypto exchange Upbit. Another cryptocurrency, Dogecoin, nose-dived nearly 20 percent to 239 won. 

Responding to intense backlash from the younger generation, the FSC has decided to exercise stricter control over its employees’ crypto trading.
Its divisions in charge of making policies regarding virtual assets will be required to report on whether their employees are investing in cryptocurrencies until May 7. Also, the authority will send notices to all its employees urging them to refrain from crypto trading for the time being, officials said. 

Meanwhile, Kim Boo-kyum, the prime minister nominee, said, “I think (the FSC chief) tried to cool down the current overheated crypto market,” adding that he would closely monitor market conditions before promoting regulations or related policies.

By Choi Jae-hee (cjh@heraldcorp.com)