South Korea’s Constitutional Court will hear arguments Thursday to determine whether the government’s 2017 crackdown on cryptocurrency violated the basic rights of Korean citizens.
You’ll recall that in late 2017, the government — well, the Financial Services Commission (FSC), anyway — enacted wide-reaching regulations on cryptocurrency amidst fears that the crypto bubble was leading to excessive speculation. In particular, the government said it was considering enacting a special law that would close exchanges and announced the introduction of a real-name system that discouraged banks from issuing new virtual accounts.
The measures may have contributed to the subsequent collapse of Korea’s cryptocurrency market.
Naturally upset by all of this, 327 crypto investors and crypto exchange officials petitioned the Constitutional Court on Dec. 30, 2017, arguing that the government’s measures had violated with no legal basic several constitutionally guaranteed basic rights, including the rights to equality, pursuit of happiness and private property.
Rights violation? Or justified response to speculation and fraud?
The lawyer who represented the group at the time argued that in the absence of laws saying otherwise, people should be free to use creative methods to transact cryptocurrency in accordance with private autonomy, just as they would be with any other product or asset.
He also argued that by making it difficult for ordinary people to exchange cryptocurrency, the exchange value of the asset dropped, leading to a sharp fall in the cryptocurrency market. This, he said, was the government violating property rights through super-legal measures.
The FSC retorted that since its regulations aimed to prevent overheated speculation and eradicate crimes such as illegal investments and fraud, they did not violate the rights of the people.
South Korea’s top financial watchdog also argued that the suspension by banks of the issuing of virtual banks accounts to cryptocurrency exchanges resulted from the body securing the cooperation of banks through an administrative order, not by placing direct regulations on cryptocurrency.
Anyway, the parties finally get to argue their points to the Constitutional Court on Thursday. According to the Korean-language blockchain news site Token Post (linked above), the hearing will likely discuss the fundamental nature of cryptocurrency, the subject and scope of regulations by financial authorities and whether state authority was involved in the suspension of virtual bank accounts to exchanges.
Appearing as a witness to argue against the FSC’s regulations will be Professor Chang Woojin of Seoul National University’s Department of Industrial Engineering, while Han Ho-hyeon of the Korea PKI Forum will testify for the government side.
Unconstitutional ruling unlikely, but…
According to the IT Chosun, the IT news site of South Korea’s influential daily Chosun Ilbo, some legal professionals are predicting the Constitutional Court will side with the government.
They point out since the government didn’t ban cryptocurrency transactions themselves, property rights were not essentially violated.
In particular, Articles 23 and 37 of the Constitution of the Republic of Korea say that limits could be placed on the exercise of property rights in accordance with public welfare. The Iconist would note, however, that both articles say property rights could be limited by Act, which the petitioners argue was not done in this case.
A lawyer who preferred to remain nameless told the IT Chosun that while there were grounds to argue that government’s measures violated basic rights, one shouldn’t expect the court to rule them unconstitutional since there were no precedents.
The keys, the lawyer said, would be the standard by which the court judged violations of basic rights and whether the court believed the principle of excessive prohibition had been violated. The principle of excessive prohibition places limits on how far the state can limit the exercise of basic rights.