Bitcoin nearly doubles in value from year’s low as Korea eases stance on cryptocurrencies

Seoul has been pushing for broad regulatory supervision of cryptocurrencies, while US lawmakers also mull stricter federal oversight

PUBLISHED : Wednesday, 21 February, 2018, 11:10am
UPDATED : Wednesday, 21 February, 2018, 12:37pm

Bitcoin hit a three-week high on Tuesday and has surged nearly 100 per cent from its lowest level this year, as its recovery continued after South Korea’s financial regulator eased its stance on cryptocurrencies, weeks after it considered shutting down digital currency exchanges.

The gains have come despite Bank of England governor Mark Carney saying earlier this week that bitcoin has “pretty much failed” as a currency, and after US lawmakers moved to consider new rules that could impose stricter federal oversight on the emerging asset class.

South Korea has been pushing for broad regulatory supervision of cryptocurrency trading as locals, including students and housewives, have entered the market despite inherent risks and warnings from policymakers around the world of a bubble.

Analysts cited South Korean news agency Yonhap, which reported Choe Heung-sik, governor of the Financial Supervisory Service, as saying that the government will support cryptocurrency trading if “normal transactions” are made. 

“While the threat of heavy regulation, or even a total ban on exchange trading, has hovered over bitcoin in recent weeks, reports this morning that the South Korean government are softening their stance have given traders confidence to buy,” said Dennis de Jong, managing director, at online brokerage in Limassol, Cyprus.

US Congress mulls stricter oversight on cryptocurrencies

Seoul previously said it was considering shutting down local cryptocurrency exchanges, which threw the market into turmoil and hammered bitcoin prices. Officials later clarified an outright ban is only one of the steps being considered, and a final decision was yet to be made. On the Luxembourg-based Bitstamp exchange, bitcoin hit a three-week high of US$11,722.58 on Tuesday. It was last up 3.4 per cent at US$11,555. From this year’s low of US$5,920 in early February, bitcoin has surged nearly 100 per cent.

“Bitcoin’s price history suggests that months of consolidation are followed by weeks of rapid advancement,” said Canaccord Genuity in its latest research note.

“The safest way to benefit from potential bitcoin price appreciation is to buy and hold for the long term; trying to time it might be too difficult.”

On Monday BoE’s Carney raised concern over extreme volatility in the world’s best known digital currency.

“It has pretty much failed thus far on … the traditional aspects of money. It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange,” Carney said. The central banker made the comments at a talk at Regent’s University, London.

Separately, Malaysia-based firm HelloGold has received a sharia-compliant certification for its gold-backed cryptocurrency and plans to launch its online gold platform in Thailand later this year, the company said.

Its cryptocurrency product, dubbed GOLDX, was launched at the end of last year and has now received certification from Amanie Advisors, a Malaysia-based Islamic finance consultancy, said chief marketing officer Manuel Ho.

Unlike other cryptocurrencies, GOLDX involves the issuance of a token backed by physical gold stored in a Singapore vault, and transactions must be completed within a defined time period, Ho said.

This means the issuance process and audited assets can address transparency, certainty and immediacy of transactions – important principles in Islamic financial contracts.

The move highlights how fintechs, companies that use new technology to revamp banking services, are extending their influence to Islamic finance markets spanning the Middle East and Southeast Asia.

Over the past year, the firm has rolled out a mobile app in Malaysia that is based on blockchain, the system that first emerged to facilitate digital currencies such as bitcoin.

That mobile app, which allows users to buy and sell physical investment grade gold, was also certified by Amanie Advisors.

HelloGold plans to expand its gold platform into Thailand in coming months, while potentially adding a third market by the end of the year, said Ho.

The firm is also exploring other unspecified assets for its blockchain technology, which involves a shared electronic ledger that allows parties to track transaction information through a secure network.