A high-ranking Ministry of Justice official on Thursday described cryptocurrency founders as scammers and insisted that any purchase of encrypted coins in Korea translates into an outflow of cash.

Shim Jae-chul, an official at Justice Ministry in charge of policy and planning, said in a panel session held in the National Assembly Thursday that the recent cryptocurrency speculation in Korea stems from coin founders’ proclamation that their coins would turn into an alternative to gold or a medium of payment.

“An investor buys a coin, expecting it will become the next gold or currency,” he said, “That's because a provider of computing power spreads claims that it will turn into gold or currency in order to draw investors.”

He picked ethereum as an example of the coin sales based on what he called such falsely-made proclamation.

“Any virtual coin not as popular as bitcoin can become the next major cryptocurrency, with a bit of an exaggeration and lying from the founder,” he said.

Shim was speaking during a public debate hosted by the opposition People’s Party at the National Assembly, specifying that his comments were his personal thoughts based on academic research and not of the ministry.

The Justice Ministry has been one of South Korea’s most vocal government opponents to the cryptocurrency craze, with its minister Park Sang-ki last week prompting market jitters by suggesting that they were aiming to close down all cryptocurrency exchanges in the country.

During the heated session, Shim also said any purchase of cryptocurrencies is a “serious outflow of cash from domestic market.”

“Now is just the beginning,” he said. “Fake currency from outside the country comes into Korea in exchange for real local currency, which amounts to trillions of Korean won. ... We must stop any purchase of coin here now.”

Founders of cryptocurrencies should issue stocks in Korea to raise money, instead of virtual coins, Shim insisted, adding that a refusal by coin founders to do so in Korea means a “declaration” that they object to the existence of legal tender.

Shim was one of the five panelists, made up of a financial watchdog official, state-led security agency official, a professor and an official of cryptocurrency exchange Coinone.

During the session, Kang Young-su, director at a special team devoted to cryptocurrency issue by the Financial Services Commission, said the financial authorities’ regulatory moves should focus on “by-products of cryptocurrency trades” and are not designed to ban cryptocurrencies per se.

Another panelist, Park Chung-ho, vice president of the state-led Korea Internet Security Agency Executive, called for cryptocurrency exchanges here to comply with a higher security standard.

By Son Ji-hyoung
(consnow@heraldcorp.com)