Bitcoin, Ripple and Etherum have been selling-off lately on concerns South Korea is prepared to ban cryptocurruncy trading.
South Korea is among the world’s largest cryptocurrency markets, and a ban in cryptocurrency trading would dry up liquidity at a time hype for cryptocurrencies has been spreading to other markets.
Still, these concerns may be overblown. For a probable reason: the Korean government’s intention may be to ban anonymous cryptocurrency trading rather than cryptocurrency trade in general, to ensure that traders comply with its rules.
“The Korean government is requiring Bitcoin traders to do so under their real name, not anonymously,” says Finance Professor Geoffrey Smith, W. P. Carey School of Business at Arizona State University.
Enforcing this rule would be a good thing for cryptocurrency markets, as it could protect investors from fraud and theft. “If the purpose of this is to protect their citizens from deception, fraud, or theft, then it is good,” continues Professor Smith.
What if this isn’t the intention of Korean government, however -- what if it is a needless regulation? That’s a bad thing for cryptocurrency markets, as it would end up destroying wealth. “If it is not designed for that purpose, then it is a needless intervention that destroys value and wealth, as evidenced by the sharp drop in Bitcoin value on the announcement of the new regulation,” adds Professor Smith.
Still, digital currencies have thus far managed to get around heavy-handed government intervention, as has been the case with the ban of Bitcoin trading by the Chinese government last fall.
China is another large cryptocurrency market. But Bitcoin and other major cryptocurrencies have staged a big rally since then.