Bitcoin Margin Trading Deemed Illegal by Police in 2018... Conducted on Overseas Exchanges
Structure Involving Promotion of Overseas Exchanges and Earning Fees... "Management Measures Needed"
[Asia Economy Reporter Gong Byung-sun] "It disappeared while I was out running an errand." On the 22nd of last month, high school student Kim Jin-su (alias, 18) came across a video about Bitcoin margin trading on YouTube. The claim of achieving a 1000% return in just three weeks caught his attention. After persuading his parents, Kim created an account and invested 500,000 won in a long position, betting that Bitcoin prices would rise. However, while he was at a convenience store, the price dropped, and all his money vanished within just three minutes. Kim said, "I started out of curiosity, but 500,000 won is a lot of money for a student, so I only feel wronged," adding, "If I think about recovering my losses, I might get addicted."
Bitcoin margin trading, a representative virtual currency (cryptocurrency) activity considered illegal in Korea, is openly promoted on YouTube. Overseas cryptocurrency exchanges allow margin trading, and this is exploited by showing high returns to naturally lure users. As a result, voices are calling for proper management measures and countermeasures.
Bitcoin margin trading refers to an investment method where members predict future prices after a certain period and place money on short selling (predicting a price drop) or long buying (predicting a price rise). If the prediction is correct, leverage multiplies the profit by a certain factor, but if wrong, the investor loses the corresponding amount. Especially, when the product of the price fluctuation rate and leverage reaches 100%, it results in liquidation, meaning all the money is lost. For example, if one places a long position on Bitcoin with 100x leverage, a 1% drop will wipe out the invested amount.
Currently, Bitcoin margin trading is considered illegal in Korea. In 2018, the police judged margin trading conducted on the cryptocurrency exchange Coinone as gambling and a violation of the Loan Business Act. Although similar to stock credit trading, the lack of government approval and the fact that it involved virtual currencies rather than stocks were the basis for the police's decision. Since then, Bitcoin margin trading has disappeared in Korea.
However, sanctions are not imposed on margin trading conducted on overseas cryptocurrency exchanges such as Binance and Bybit. Taking advantage of the unregulated cryptocurrency market, Bitcoin margin trading promotions are being conducted on YouTube. One YouTuber promoted it as "a chance to turn your life around with 100x Bitcoin margin trading." Another YouTuber provided a complete guide titled "Binance Margin and Futures Trading Perfectly Explained," covering registration, deposits, and trading. The videos were not age-restricted, making them easily accessible to minors.
The problem is that victims of Bitcoin margin trading are increasing. It requires real-time responses and a bit of luck to make profits, but many jump into margin trading without understanding this. Kang Jeong-min (alias, 29) said, "I got information on YouTube that high profits could be made through margin trading and started blindly, but it was no different from gambling," adding, "I placed a 2.5 million won short position with 10x leverage, but after Tesla CEO Elon Musk's supportive remarks on Bitcoin, the price surged, and I lost everything without being able to respond." He continued, "Of course, investment responsibility lies with the individual, but if Bitcoin margin trading is openly promoted on YouTube, greater harm could occur," and emphasized, "I think management measures are necessary."
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