Coronavirus Impact On Crypto, Korea’s Tax Proposition, and Japan’s Possible Digital Currency

February 28, 2020

The ongoing coronavirus disease outbreak is having a major effect on the crypto industry, with China’s central bank delaying its work on a national digital currency. The currency, may not be issued on a blockchain, at least according to a People Bank of China research report which concluded that the blockchain is not ready for large payment systems. Japan is possibly laying the groundwork for digital currency. Read this and more in the weekly round-up of the top stories in Asia’s crypto scene.

Japan’s SBI Holdings Leads $16.8 Million Funding Round in Taiwanese Blockchain Startup CoolBitx

Tokyo-based financial services company SBI Holdings led a $16.8 million in a Series B funding round in CoolBitx, a Taiwanese based blockchain startup fostering the adoption of virtual products through the use of its products.

SBI, an existing investor in the Taiwanese startup, was joined by Bitsonic – a Korean-based crypto exchange, the National Development Fund of Taiwan, and Monex Group, a financial services company that bought Coincheck after the Japanese exchange lost $530 million in NEM currency in a January 2018 hack.

The startup, founded by Michael Ou in 2014, intends to use the funds to expand its products – Sygna product line – in the Asia Pacific and beyond and continue working on developing its major product CoolWalletS.

CoolWalletS is a hardware wallet that allows smartphones to be paired with mobile smartphones. The Sygna products are designed to cater to virtual asset service providers (VASPs) and allow them to easily comply with the standards of the traditional financial industry.

China’s Central Bank Report: Blockchain is not Ready for Large Payment Systems

The People’s Bank of China (PBoC), the central bank of the communist Asian country, together with its research team, the Digital Currency Research Institute, released a report about the prospects of using blockchain technology in payment systems.

According to the report, the distributed ledger technology which made its mark as the technology underpinning bitcoin and its cousins is not ready for large payment systems.

The implication of this conclusion is that blockchain might not be feasible for the development of the digital renminbi.

“The blockchain at the cost of synchronous storage and co-calculation of a large amount of redundant data, sacrifices system processing efficiency and some of the customer’s privacy, and is not yet suitable for high-concurrency scenarios such as traditional retail payments,” reads part of the report.

Coronavirus Outbreak Delays China’s Research into Digital Currency

The ongoing coronavirus outbreak that started in December 2019 in Wuhan, has led to the delay in the development of the national digital currency in the first quarter, Global Times learned from sources close to the matter.

However, the digital currency will likely be launched as planned as the central bank has the necessary technology, resources, and talent to catch up on lost time.

The pilot of the digital currency is expected to be carried out this year although some issues still need to be ironed out.

“The coronavirus outbreak has led to postponed work resumption in government institutions, including the People’s Bank of China (PBOC). Policymakers and research staff involved in the DCEP project are no exception, which weighs on the development process,” said an anonymous source who spoke to Global Times.

Shentu Qingchun, the CEO of Shenzen-based startup BankLedger involved in the development of the digital currency said that the central bank was expected to make an announcement in the first quarter. However, given the situation and time left, it is highly unlikely that the announcement will be made on time, Qingchun said.

Japan’s financial and monetary bigwigs contemplating issuing a national digital currency

Japan’s financial and monetary big authorities have commissioned research to be conducted to study the feasibility of issuing a digital currency.

This makes the Asian country the possible latest entrant into the digital currency race, in which many governments such as China are developing their own digital currencies.

Japan’s Finance Ministry met with the Bank of Japan (BoJ) and the financial watchdog, the Financial Services Agency (FSA) to discuss how and if the central bank can issue a digital currency.

The three entities are expected to discussing the impact of digital currencies on the economy and the global currency system which is reliant on the US dollar.

Japan’s central bank has not yet started any concrete work on the study of a national cryptocurrency by Governor Haruhiko Kuroda said their plan is to be ready.

“We are advancing research and study from the technical and legal perspectives so that we will be able to move in an appropriate way when there is a growing need,” quoted Governor Kuroda.

The BoJ, together with the European Central Bank (ECB), the Bank of England, the Bank of International Settlements (BIS) and the central banks of Sweden, Canada, and Switzerland announced a joint effort on the study of digital currencies.

South Korean Tax Experts Urges Government to Go Ease on Cryptocurrency Taxation

Tax experts in South Korea have advised the government to take a two-step tax approach on cryptocurrencies before enacting tax reforms in late 2020.

Speaking at a seminar held on Feb. 21, the members of the Korean Tax Policy Association highlighted that low-level trading tax on cryptocurrency profits should be implemented before transitioning to transfer income tax.

The low-level trading tax was proposed because there is no legal framework to put transfer taxation into effect. The experts believe that this is the most effective approach to implementing a cryptocurrency income tax policy.

The Korea Blockchain Association welcomed the tax experts’ recommendation, stating that:

“Related laws are still absent and the taxation infrastructure is still insufficient to cover cryptocurrencies and, as such, some supplements need to be added on the expense calculation side.”

The blockchain association further added that cryptocurrency acquisition costs should be clearly defined before imposing a tax transfer. However, this will likely prove to be difficult as cryptocurrencies are traded on multiple platforms with different rates.


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