(Reuters) – The Seoul-based operator of the world’s busiest virtual currency exchange Bithumb said on Tuesday it will fully comply with potential regulations from the South Korean government and adequately capitalize itself to protect its clients. BTC Korea.Com Co. also told Reuters it will “actively cooperate to build a right set of rules”, which may include steps such as properly identifying its clients by their real names.
”A right set of regulations will rather nurture the (virtual currency) market, and we would welcome that,” Bithumb said in an email reply to questions from Reuters, adding that such a code of conduct could add legitimacy to the market. Currently, anyone with a mobile phone in their name and a bank account can sign up and trade via Bithumb. The comments came a day after bitcoin BTC=BTSP hit a record high of $17,270 on the Luxembourg-based Bitstamp exchange, despite questions about the cryptocurrency’s real value and worries about a dangerous bubble.
Though it was the world’s top operator of virtual currencies in November by trading volume and South Korea is among the world’s biggest bitcoin markets, BTC Korea.Com has maintained a low profile since the launch of Bithumb in 2014 and there is little public information about it. Drawn by bitcoin’s explosive surge of more than 15-fold this year, ordinary South Koreans from housewives to college students and office workers have rushed to mobile-app based virtual currency exchanges such as Bithumb hoping to make a quick profit, despite warnings from the government.
After bitcoin prices soared 21 percent in one week last month, Prime Minister Lee Nak-yeon said it was time for the government to take action as “some serious pathological phenomenon” could arise if left unchecked.
The finance minister said on Monday that ministries are in talks to decide whether such trading should be regulated, while the chief of the financial regulator said some Justice Ministry officials are calling for an outright ban on cryptocurrency trading, although nothing has been decided yet in terms of regulating the market.
South Korea accounted for 15 percent of global bitcoin trading in the past 24 hours on exchanges that charge fees, according to Coinmarketcap.com. That is way above the size of its economy at about 2 percent of global output. On some days, daily bitcoin volume has surpassed that of the nation’s small-cap Kosdaq share index, which has a market value of 271 trillion won ($248.6 billion), according to the government.
Bithumb has been at the center of the speculative frenzy. With about 70 percent of market share in South Korea, it has been the dominant place that ordinary South Koreans go to buy and sell the virtual currency. Given that most of South Korea’s casinos are for visiting foreigners only, a pent-up appetite for gambling has probably played a part in the bitcoin mania, says Park Nok-sun, a cryptocurrency analyst at NH Investment & Securities. “The fact that anyone can start trading with small money and the lack of volatile betting places helped the market to go viral in Korea,” Park said.
Headquartered in Seoul’s posh Gangnam district, BTC Korea.Com has disclosed little about its trading platform Bithumb or its founder Kim Dae-shik. Asked if looming regulations would curb the boom, the company said “the trend would be irreversible, and we see money flowing into the virtual currency market from stock markets.”
Shim Mi-yeon, a 36-year old Pilates instructor and a Bithumb user in Seoul, says she is not afraid of regulations. “China imposed some heavy regulations but bitcoins still surged right? South Korea is a much smaller country and I think the market can withstand a regulatory crackdown in the long run,” she said, as she checked the latest prices on her phone. The company cautions against speculative behavior. In a pop-up message on its website, Bithumb advised its customers against “unreasonable investments” as virtual currency trading is not a marketplace of currencies guaranteed by the government.
Kim Yong-beom, vice chairman of the Financial Service Commission, on Monday described virtual currency trading as a “Ponzi” scheme.
“We will continue to ban financial institutions from dealing with cryptocurrency-related products. The reason why prices go up is because they expect the next person to take (the coin) at the price they want, and that really is a Ponzi scheme.”
