Bitcoin futures reportedly banned in South Korea

Many reports are saying South Korea isn’t getting in the “bitcoin futures trading game” and this is not because local established financial firms are not ready to embrace it but an official ban from the South Korean officials is what is preventing them.

The recent surge in the price of bitcoin is what accounted for the trading of a derivative of the hottest cryptocurrency on the Chicago Board Options Exchange and from the look of things, it is now all between the U.S and Japan.

Japan has more than embraced Bitcoin as new laws have been set up to recognize bitcoin as a legal method of payment and now stand to see a major financial institution launch its own bitcoin derivatives product.

The Tokyo Financial Exchange is even pressing ahead to list its bitcoin futures contracts by mid-2018.

In wake of this unfortunate decision, Korean brokers such as eBest Investment & Securities and Shinhan Financial were forced to take back already planned client seminars for bitcoin futures trading, according to the Korea Herald.

Just recently, there was a rumor in circulation that the South Korean government was considering banning all transactions involving cryptocurrencies after a government official was quoted saying that.

The announcement came after Prime Minister Nak-Yeon gave a strict warning about cryptocurrencies possibly corrupting the nation’s youth. He encouraged regulators to set up something of a task force alluding cryptocurrencies as the means to a pyramid as well as a speculative investment if left unattended to.

It is also reported that the South Korean government is planning to put in place measures to tag cryptocurrency exchanges illegal fundraisers and shut them down as early as this week. They also seek to regulate them as them “as harsh as pornography suppliers,” all in attempts to bring the purchase of speculative coin under control.

The institution of this ban, therefore, isn’t much of a surprise since the South Korean have been on the issue of bitcoin and its affiliate for some time now, making some pretty harsh decisions in the process.

Choi Jong-Ku, chairman of the Financial Services Commission, Korea’s most prominent financial guardian stated that the ministries were discussing the extent of trade regulations and that many governments groups involved were now on many opposite sides. He, however, noted that any decision which seeks to prevent transactions must have the backing of some legal basis.

Earlier this year, the practice of initial coin offerings (ICOs), which involves startups issuing their own digital currencies to raise funds, was banned in South Korea. What followed was the establishment of a governmental task force to regulate trading.

According to reports, Kim Jin-Hwa, the former head of Korbit is trying to assemble the leading bitcoin venues in the country, thus Bithumb, Coinone, and Korbit to create an association to represent the interests of the industry. These institutions combined account for nearly 25% of the world’s bitcoin transaction volume.

“An entry of new technology into Korea is hamstrung by the regulation,” he was quoted by reporters.

Mati Greenspan, an analyst with eToro, a trading platform stated that bitcoin is very popular in South Korea and in an email last week, he said recent estimates has revealed 21% of all global bitcoin volume are conducted in the Korean Won.

He added that the fact that South Korea is nearer to North Korea might help in explaining the higher risk appetite of South Koreans.

“After recently going through a political meltdown and ousting the former President Park Geun-Hye, and after watching the CEO of the Samsung go to prison on corruption charges, their faith in the system is currently at a justifiable all-time low,” he said.

State of bitcoin futures after launch

While South Korea is on the sidelines now, many countries are showing much interest in bitcoin futures and are prepared to move ahead with its trading.

CBOE launched its offering on Sunday, with CME Group also following a week after and as already mentioned, the Tokyo Financial Exchange is also making plans to unveil its own bitcoin futures. CBOE’s website reportedly crashed for a few minutes which afterward saw a rise in the price of both bitcoin and futures contracts.

“The initial reaction was beyond expectations with the futures contract climbing more than 20% and triggering two trading halts. CBOE’s website experienced unprecedented traffic which may well have sent a new benchmark; the frenetic activity led to delays and outages”, the chief market strategist at FXTM, Hussein Sayed, said in an email.

Need for fear?

It seems South Korea’s regulators aren’t the only people who have expressed worrying concerns about bitcoin futures. The cryptocurrency is known for its huge amount of volatility. It can record swings of about 20% in a day and some players at stake fear futures contracts would add a large degree of numerous risks to the financial system.

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