In July 2017, the government of South Korea recognized bitcoin as a means of payment, allowing financial companies to process payments up to$20,000.
The bitcoin industry in South Korea flourished: in July 2017, local crypto-exchanges already processed 14% of all bitcoin transactions. The country became the third largest crypto market after the USA and Japan. However, the government soon changed its regulatory strategy and followed China's example. The local regulator FSC explained the prohibitions and restrictions for the protection of investors against fraud.
In December 2017, the South Korean government banned anonymous trading on local crypto-exchanges after the country's Prime Minister said that because of bitcoin, children"are engaged in illegal activities such as drug trafficking." All cryptocurrency investors in South Korea were ordered to create Bank accounts indicating the real name or to cease to engage in trading. According to the introduced rules, the participation of foreigners and minors in the trade on local exchanges was also prohibited, and officials were banned from trading in March 2018.
On January 22, the government of South Korea announced the introduction of taxes for cryptocurrency exchanges: 22% of the company's income tax and 2.2% of the local income tax.
However, on may 29, the national Assembly again proposed to legalize the ICO in the country. Although the plans to allow the ICO to be held began to appear in December last year, it is not surprising that the official statement was made quite recently, when the government again showed interest in creating a blockchain infrastructure. When Hong Wuyi-RAK, representative of the ruling Democratic party of Korea, first said that Korea has no other choice but to allow the ICO, he explained:
"THE MAIN PURPOSE (OF REGULATION) IS TO HELP ELIMINATE THE UNCERTAINTY FACED BY THE BLOCKCHAIN-BUSINESS»
At the General meeting of the National Assembly devoted to the 4th industrial revolution, the following theses were announced:
"WE NEED TO ESTABLISH A WORKING GROUP WITH THE PARTICIPATION OF PRIVATE EXPERTS IN ORDER TO INCREASE THE TRANSPARENCY OF CRYPTOCURRENCY TRADING AND TO ESTABLISH HEALTHY SHOPPING ORDER... WE WILL ALSO CREATE A LEGAL FRAMEWORK FOR CRYPTOCURRENCY TRADE, INCLUDING LIFTING THE BAN ON ICO AND THE ESTABLISHMENT OF A STANDING COMMITTEE OF THE NATIONAL ASSEMBLY»
In may, the Central Bank of South Korea began to study blockchain technology in order to create a national digital currency, as part of the plan to phase out physical money by 2020.