SEOUL: South Korea said on Wednesday it may tax capital gains from cryptocurrecy trading as global regulators worried about a bubble, with Australia’s central bank chief warning of a ‘speculative mania” that has seen the digital asset making rip-roaring gains.
As bitcoin futures made their world debut on a US stock exchange this week, policy makers have been forced to contend with cryptocurrencies becoming more of a mainstream play and the need to regulate them.
The world’s biggest and best known cryptocurrency, bitcoin , surged past $17,000 (SR63,750) to new all-time highs this week, marking an almost dizzying 20-fold rise this year and feeding fears of a bubble.
Australia’s central bank governor Philip Lowe warned on Wednesday the fascination with the assets felt like a “speculative mania.”
The comments come days after his New Zealand counterpart said bitcoin appeared to be a “classic case” of a bubble, and cast doubt on its future. The chairman of the US Securities and Exchange Commission (SEC) on Monday warned trading and public offerings in the emerging asset class may be in violation of federal securities law.
Digital currencies are very popular across Asia, with many retail investors giving up their daily jobs to trade them full time in countries such as Japan and South Korea, which together make up for more than half the global trading volumes by some estimates.
But the possibility of major losses if the bubble bursts and wild gyrations of 10-30 percent in a single day have instilled a sense of urgency among policymakers to come up with a regulatory response.
In Seoul, after an emergency meeting on Wednesday, South Korea’s government said it will consider taxing capital gains from trading of virtual coins and will also ban minors from opening accounts on exchanges, according to a statement obtained by Reuters ahead of its official release.
To be eligible, exchanges in South Korea will need to uphold investor protection rules and disclose all bid and offer quotes.
The measures need parliamentary approval. Seoul will maintain a current ban on all financial institutions dealing virtual currencies.
“The regulations in Korea will not have a negative effect,” said Thomas Glucksmann, head of marketing at Hong Kong-based exchange Gatecoin, adding that on the contrary, “licensing brings certainty, which encourages already regulated entities ... to get involved in addition to skeptical retail investors.”
In an interview with Reuters on Tuesday, the Seoul-based operator of the world’s busiest virtual currency exchange Bithumb, said it will fully comply with potential regulations from the South Korean government and adequately capitalize itself to protect its clients.
Elsewhere in Asia, China in September ordered Beijing-based cryptocurrency exchanges to stop trading and immediately notify users of their closure, in a move aimed at limiting risks in the speculative market. Economists and cryptocurrency advocates say the move was also intended to close an avenue used to evade Beijing’s capital controls.
Japan requires crypto-currency operators to register with the government. The Japanese government in April granted cryptocurrencies legal status as a means of settlement and in September officially recognized 11 digital currencies exchanges.
Bitcoin dropped to $16,575 on Wednesday, down 0.5 percent on the day, after losing $152 from its previous close. On Bithumb, it was down 2 percent at $17,083. Bitcoin futures maturing in January on the Cboe Global Markets’s Cboe Futures Exchange were $17,700, having opened at $18,010.
Bitcoin-related shares in Seoul slumped in early trade on news of the government’s emergency meeting, before rebounding as the statement did not mention harsh restrictions. Vidente and Omnitel, which hold stakes of Bithumb, were up 4 percent and 7 percent, respectively. Bitcoin mining-related company JCH Systems were up 1 percent.
While crypto trading has attracted anyone from hedge funds and finance professionals to housewives and college students, it is yet to lure institutional asset managers whose mandates require them to make long-term investments which do not chime with highly-volatile digital currencies, whose fundamental values are also difficult to define.
“BlackRock’s view is that this isn’t a financial asset that we would trade in terms of equities or fixed income instruments,” said Belinda Boa, head of active investments for Asia Pacific, BlackRock.
“There are questions around the store of value and the fact that actually for our clients we’re looking at longer term investments.”
South Korea considers cryptocurrency tax as regulators grapple with ‘speculative mania’
South Korea considers cryptocurrency tax as regulators grapple with ‘speculative mania’
Global brands shut Middle East stores as conflict causes chaos
- Luxury brands and retailers close stores in Middle East
- Conflict threatens the region that has been luxury’s fastest growing
- Mass-market retailers monitor situation, adjust operations in region
PARIS: In Dubai and other major Middle Eastern shopping hubs, many stores are closed or operating with a skeleton staff as the escalating conflict in the region causes chaos for businesses and travel.
The US-Israeli air war against Iran expanded on Monday with no end in sight, with Tehran firing missiles and drones at Gulf states as it retaliates for a weekend of bombing that killed Iran’s supreme leader and reportedly killed scores of Iranian civilians, including a strike on a girls’ primary school.
Chalhoub Group, which runs 900 stores for brands from Versace and Jimmy Choo to Sephora across the region, said its stores in Bahrain were closed, while other markets, including the UAE, Saudi Arabia, and Jordan remained open though staff attendance was “voluntary.”
“We operate with a lean team formed of members who volunteered and feel comfortable to come to the store,” Chalhoub’s Vice President of Communications Lynn al Khatib told Reuters, adding that the company’s leadership team personally visited Dubai Mall and Mall of the Emirates on Monday morning to check in with workers.
E-commerce giant Amazon closed its fulfillment center operations in Abu Dhabi, suspended deliveries across the region and instructed its employees in Saudi Arabia and Jordan to remain indoors, Business Insider reported on Monday, citing an internal memo.
Gucci-owner Kering said its stores were temporarily closed in the UAE, Kuwait, Bahrain and Qatar and it has suspended travel to the Middle East.
Luxury growth engine under threat
Shares in luxury groups LVMH, Hermes, and Cartier-owner Richemont were down 4 percent to 5.7 percent on Monday afternoon as investors digested the knock-on impacts of the conflict.
The Middle East still accounts for a small share of global spending on luxury — between 5 percent and 10 percent, according to RBC analyst Piral Dadhania. But the region was “luxury’s brightest performer” last year, according to consultancy Bain, while sales of expensive handbags have stalled in the rest of the world.
Now, shuttered airports have put an abrupt stop to tourism flows into the region and missile strikes — including one that damaged Dubai’s five-star Fairmont Palm hotel — are likely to dissuade travelers, particularly if the conflict drags on.
“If you assume that it’s a $5 billion to $6 billion (travel retail) market and let’s say it’s going to be shut down for a month, we are talking about hundreds of millions of dollars that are definitely at risk,” said Victor Dijon, senior partner at consultancy Kearney.
If Middle Eastern shoppers cannot travel to Paris or Milan, that could also hurt luxury sales in Europe, he added.
Luxury brands have been investing in lavish new stores and exclusive events across the region. Cartier unveiled a “high-jewelry” exhibition in Dubai’s Keturah Park just days before the conflict started.
Cartier and Richemont did not reply to requests for comment.
Luxury conglomerate LVMH has also bet big on the region. Last month, its flagship brand Louis Vuitton staged an exhibition at the Jumeirah Marsa Al Arab hotel, and beauty retailer Sephora launched its first Saudi beauty brand.
LVMH does not report specific figures for the region, but in January Chief Financial Officer Cecile Cabanis said the Middle East has been “displaying significant growth.” LVMH did not reply to a request for comment on how its business may be impacted by the conflict.
The Middle East has also attracted new investment from mass-market players. Budget fashion retailer Primark said in January that it plans to open three stores in Dubai in March, April and May, followed by stores in Bahrain and Qatar by the end of the year.
“Primark is set to open its first store in Dubai at the end of March but clearly this is a fast-moving situation which we are monitoring closely,” a spokesperson for Primark-owner Associated British Foods said.
Apple stores in Dubai will remain closed until Thursday morning, the company’s website showed, while Swedish fast-fashion retailer H&M said its stores in Bahrain and Israel are closed.
Consumer goods group Reckitt has told all employees in the Middle East to work from home, temporarily closed its Bahrain manufacturing site and suspended all business travel to the region until further notice.
