In the wake of recent controversies concerning digital currencies, ranging from overheated speculation to cyberattacks on exchange systems, experts here locked horns and engaged in intense discussion on how to protect users from financial damages.

The parliamentary National Policy Committee on Monday held a public hearing to look into the revision bill of the Electronic Financial Transactions Act, earlier submitted by Rep. Park Yong-jin of the ruling Democratic Party of Korea.

While the lawmaker called for an alleviative licensing system for cyber currency operators, financial supervisors advocated a stronger regulative frame as a pre-emptive measure against expanding possibilities of abuse. Experts from the civil sectors remained divided.

“Once we apply an extensive ban, it will become more difficult later on to set rules (about the cyber currency business),” said an official at Park’s office.


 
The lawmaker’s idea is that the business should be licensed to operate within legal boundaries, under the supervision of the Financial Services Commission.

Government officials, however, took guard against Park’s forward-leaning policy proposal.

“Cyber currency is currently more of a subject of transactions and speculations than a means of payment,” said Cha Hyun-jin, director of payment and settlement systems department at the Bank of Korea.

“Legislation (concerning its operation license) should be approached in a more prudent manner.”

FSC Chairman Choi Jong-ku had earlier expressed his concerns over the speculative aspects of cyber currencies.

“There is no explicit need or validity to include cyber currencies as part of the financial business sector,” Choi said late last month, revealing his opposition to Rep. Park’s lenient bill.

The average daily amount of circulated cyber currency, strongly steered by bitcoin and Ethereum, hit the mark of 1 trillion won ($918 million) in June. Amid increasing transactions, Bithumb, one of the leading cyber currency exchanges here, was hit by an extensive cyberattack in July resulting in the theft of the personal information of some 30,000 customers.

“Cyber currency exchanges stand in a legal blind spot, as they only need to acquire a telecommunications operator license before stepping into business,” said Han Kyung-soo, chief partner lawyer at law firm Wimin, calling for a minimum level of regulations.

Despite the soaring amount, however, there is currently no way to compensate for damages in case of hacking or other possible cyber violations, Han claimed.

Advocates of the blockchain industries have claimed a detailed classification system is needed to differentiate authentic digital currencies from speculative copycats.

“The term ‘cryptocurrency’ should be used to differentiate (bitcoin and other leading cyber currencies) from other similar products that are issued by a specific subject,” said Kim Jin-hwa, joint representative of the preparatory committee for the Korea Blockchain Industry Promotion Association.

Lee Chun-pyo, honorary professor of economics at Seoul National University, asserted that an overall ban on the transaction of cyber currency may discourage innovative businesses.

“It is not desirable for authorities to impose a uniform ban on initial coin offerings, without even knowing what individual companies may achieve through ICO funding,” Lee said.

Meanwhile, senior financial regulators from South Korea, Japan and China met in Incheon on Friday to discuss the volatility over US interest rate hikes and to share policy experiences on financial technology, including cryptocurrencies. 

By Bae Hyun-jung (tellme@heraldcorp.com)