The South Korean government on Thursday said it plans to ban cryptocurrency trading, sending bitcoin prices plummeting and throwing the virtual coin market into turmoil as the nation’s police and tax authorities raided local exchanges on alleged tax evasion.
“There are great concerns regarding virtual currencies and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” said justice minister Park Sang-ki at a press conference, according to the ministry’s press office.
A press official said the proposed ban on cryptocurrency trading was announced after “enough discussion” with other government agencies including the nation’s finance ministry and financial regulators. Once a bill is drafted, legislation for an outright ban of virtual coin trading will require a majority vote of the total 297 members of the National Assembly, a process that could take months or even years.
The government’s tough stance triggered a selloff of the cyrptocurrency on both local and offshore exchanges.
The local price of bitcoin plunged as much as 21 percent in midday trade to 18.3 million won (12,638.52 pounds) after the minister’s comments. It still trades at around a 30 percent premium compared to other countries. Bitcoin was down more than 10 percent on the Luxembourg-based Bitstamp at $13,199, after earlier dropping as low as $13,120, its weakest since Jan. 2.
At around 4.50 a.m. London time, a few minutes after news, over $106 billion of value was wiped off of the entire cryptocurrency market when compared to the market capitalization at the beginning of the day on Thursday, according to CNBC.
This fall in prices comes after two major cryptocurrencies hit record highs. Ripple hit an all-time high of $3.84 on January 4. It has fallen over 50 percent since then as of 8:00 a.m. London time on Thursday.
Once enforced, South Korea’s ban “will make trading difficult here, but not impossible,” said Mun Chong-hyun, chief analyst at EST Security.
“Keen traders, especially hackers, will find it tough to cash out their gains from virtual coin investments in Korea but they can go overseas, for example Japan,” Mun said, quoted by Reuters.
Park Nok-sun, a cryptocurrency analyst at NH Investment & Securities, said the herd behaviour in South Korea’s virtual coin market has raised concerns.
Indeed, bitcoin’s 1,500 percent surge last year has stoked huge demand for cryptocurrency in South Korea, drawing college students to housewives and sparking worries of a gambling addiction.
“Some officials are pushing for stronger and stronger regulations because they only see more (investors) jumping in, not out,” Park said.
South Korea is one of the major cryptocurrency trading markets. It accounts for somewhere in the region of 6 percent to 12 percent of bitcoin trading, according to industry website CryptoCompare. For ethereum, this figure is higher at around 14 percent. Ripple buying in the South Korean won can be as high as 33 percent, depending on the day.