Bitcoin could not live in a vacuum, that is for sure. It has to go mainstream no matter how slow the process can be but then along the way it has to compromise a little there and a little here. Recognition from the government can mean some regulations not on the technical side of Bitcoin but as to its use and for tax purposes. However, the most important thing is the net gain which such "legalization" or recognition from those who are in authorities can bring.
We all live in a world of compromise. If it can mean that we would all be required to present documents by Bitcoin services providers, then so be it. If it mean we would be taxed by Bitcoin-related transactions then we actually have a moral and legal obligation to do so, not just with Bitcoin actually.
The most important thing is that transactions can now be done under the bright light. How much an inconvenient it would be if any government would ban the use of Bitcoin and prosecute anybody doing business with Bitcoin.
We don't live in a perfect world and even Bitcoin is not perfect.
The problem is South Korea isn't legalizing bitcoin at all. Bitcoin was already legal in the sense that it wasn't illegal, you wouldn't get policemen knocking on the door before. To my understanding it was somewhat of a self regulated industry before this.
However, now the government is going to regulate the exchanges themselves. This will probably mean that a lot of exchanges will be forced into complying with super strict AML laws, and exchanges will go out of business because no bitcoin user wants to do this.
Is this really legalizing? No. It's simply putting more and more restrictions. It generates recognition, but it doesn't do anything positive, practically speaking, if not just completely negative.
