Cryptocurrency prices surge on expectations of futures trading

By Lim Chang-won Posted : January 19, 2018, 10:00 Updated : January 19, 2018, 10:00

[Yonhap Photo]



SEOUL, Jan. 19 (Aju News) -- Cryptocurrency prices surged Friday partly on expectations that South Korea is considering introducing a U.S.-style futures trading system to stop an outflow of capital, according to government and financial industry officials.

The Chicago Futures Exchange (CME) allows transactions of derivatives such as futures and options. To introduce a similar system in South Korea, a related law should be revised first to recognize virtual currency as a financial product for legalized transactions.

"Financial authorities have decided to allow transactions within the system, but management and supervision over market manipulation, money laundering and tax evasion will proceed more thoroughly," a former senior financial official said, adding preparations are underway to introduce futures trading, led by Financial Services Commission Vice Chairman Kim Yong-beom.

Financial officials hope a futures trading system can stop a flight of capital through illegal or short-lived virtual currency transactions. They attribute the so-called Kimchi premium to South Korea's tight regulations on foreign exchange transactions.

"If futures transactions become official, there will be no big gap in prices at home and abroad and hedge transactions in domestic and overseas markets will help stabilize prices," a financial official said.

However, there are concerns that price fluctuation could be larger, although the system is expected to reduce the price gap between virtual currencies traded in each country.

"If virtual money is recognized as a financial product, it can be taxable," a banking industry official said, agreeing a futures trading system would help prevent illegal transactions and an outflow of foreign currencies.

Kim Jae-young, a management information system professor at Korea University, warned that futures trading could produce another speculative force.

"Virtual money is a private money, and control of the private sector will trigger a backlash from investors," Kim said, adding that unlike the U.S. government which supports corporate work, the situation in South Korea is similar to China, which maintains tight control.

"I'm not sure if we should introduce a similar system to the US market" at a time when financial authorities already pledged tight regulations, Kim said. He warned South Korea's cryptocurrency market may become a place for speculation because it is immature and far different from that of an advanced country.

 
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