[The Editors' Verdict] Cryptocurrency, Social Issues, and Regulation

Cryptocurrency news started appearing a few years ago and has been increasing recently. Cryptocurrencies can be viewed not only from a technical perspective but also economically in terms of currency, taxation, international finance, regulation, and sociology. Here, we will look at the social aspect. Why do people in their 20s and 30s get upset when cryptocurrency is mentioned?

At the core of this is real estate. Older generations were able to accumulate wealth through real estate. Although not all grandparents of the 2030 generation had this experience, until the early 2000s, trading houses a few times could move one from monthly rent to jeonse (a large lump-sum deposit lease), from jeonse to owning a home, and from owning one home to multiple properties. Moving was not easy, but it allowed for asset growth. Even the parents of the 2030 generation still worked hard at their companies, saved money, and could own homes through loans. Before the 1997 Asian financial crisis, the economy was growing, so there was little worry about employment. Therefore, home ownership was linked to labor, and any shortfall was covered by loans.

The problem is that the 2030 generation does not have such opportunities. Even after graduating from university, finding a job is as difficult as catching a star in the sky, and even part-time jobs are hard to come by. The place where the 2030 generation can jump in to make a living is investment. Although not as large as real estate, the stock market is relatively accessible with smaller amounts of money. Especially during the stock market crash caused by the COVID-19 pandemic last year, many people who bought stocks earned financial income in addition to earned income. As COVID-19 vaccination rates increase and both overseas and domestic economies seem to be back on track, the job market remains tight, and part-time jobs are still scarce. Therefore, they need to look for alternative markets beyond the stock market, which is the cryptocurrency market.

The 2030 generation is relatively very tech-savvy and can enter the cryptocurrency market without the theories or market analysis required in the stock market. Of course, cryptocurrencies have no intrinsic value. Their prices are highly volatile, determined solely by supply and demand, and can fluctuate wildly based on comments from celebrities or YouTubers. Thus, it is almost like a gambling arena, operating 24/7, which also causes mental exhaustion. Many media outlets report stories of people making billions of won from small investments. However, those who actually made money are fewer than those who suffered losses. People who have been scammed rarely appear in the news, but there are more cases than reported.

The fact that cryptocurrencies have no intrinsic value or that government control is impossible does not concern investors. Also, the initial sources of cryptocurrency funds included money laundering, war, terrorism, and drug money, and some countries used it for operational funds, causing issues with foreign exchange control, but these are matters for other countries. Rather, the complaint is why the government collects taxes without regulating the market. Taxes exist wherever income is generated. In Korea, there are tax systems and regulations applicable depending on how cryptocurrencies are viewed. The domestic tax system likely classifies cryptocurrencies as a type of intangible asset and applies other income tax considering fairness with stocks and other assets. However, while stock transaction taxes exist, capital gains tax on stocks was deferred until 2023 due to COVID-19, so cryptocurrencies are also a matter to consider.

During the tax deferral period, there is also the question of which laws should be applied. Currently, there is the Act on Reporting and Using Specified Financial Transaction Information (Special Financial Transactions Act), but it has limitations. Regarding user protection, it is necessary to also consider the Telecommunications Business Act, Information and Communications Network Act, Electronic Commerce Consumer Protection Act, Door-to-Door Sales Act, and the Act on Regulation of Terms and Conditions.

Professor Kim Sang-bong, Department of Economics, Hansung University