Virtual currency fever

In the 1630s, investment in tulips was a prevailing trend in vogue in the Netherlands. As tulips from Turkey, which were newly introduced to the Netherlands at that time, gained popularity in the upper class society, people scrambled to buy them, which caused tulip’s prices to surge. The price of certain tulip seed rose so sharply that a piece of the plant was priced at as high as a house. However, since there were only people who wanted to buy and no one sought to sell, the price bubble burst three years later and the tulip’s price tumbled. As a result, even the entire Dutch economy got on shaky ground. It is the so–called "Tulip Bubble" incident.

Some critics compare the investment fever in virtual currencies that is sweeping the world to the Tulip Bubble. They say that the price of virtual currencies surged not because of actual utility but because sense of vague expectations for a hike in their value. In contrast, others predict that the value of such currencies will rise further. Whatever the predictions are, since programmer Satoshi Nakamoto (later turned out to be Australian businessman Craig Wright) created bitcoin in 2009, virtual currencies have rapidly expanded their turf in our daily life.  

Countries are scrambling to cope with virtual currencies or cryptocurrencies. Germany and Japan are now recognizing bitcoin as means of payment and transaction settlement. The U.S. even set guidelines for taxation of virtual currencies. Some countries including Russia even completely ban the issuance and circulation of such currencies. Against this backdrop, Tokyo has announced a plan to use bitcoin as a tool to attract foreign tourists ahead of the Tokyo Summer Olympics in 2020. Big Camera, one of Japan’s Big Three electronics retailers, has started process to establish a bitcoin-based transaction settlement system.

 In Korea, virtual currencies are still a speculative investment product that has yet to be defined and managed by law and regulations. The total value of bitcoins transacted through private sector exchanges in Korea is worth about 1 trillion won (894 million U.S. dollars), but the country has yet to decide how to define virtual currencies let alone enacting laws. Recently, Bithumb, the local virtual currency exchange, was hacked, and a growing number of individuals who lost their personal information including resident ID numbers, have suffered from secondary damage. Virtual currencies are hard to hack because they are managed through bloc chain in which the list of transactions in public is linked like a chain. However, it is completely another matter to hack the exchange. Considering this, the fact the National Assembly recently started discussions about a bill to change the system of virtual currency exchanges into one requiring state license is welcome news. Korea needs rules and proper regulations on virtual currencies not only to prevent damage but also to keep abreast of global trends.