News follows nation’s clampdown on cryptocurrencies as exchanges are raided over alleged tax evasion and fears of gambling addiction
The value of bitcoin plunged 13.5% in the early hours of Thursday after news hit that South Korea is planning to ban cryptocurrency trading.
News of the ban follows the raiding of local cryptocurrency exchanges by police and tax authorities over alleged tax evasion, as one of the key nations driving the demand for bitcoin and other virtual currencies attempts a clampdown.
“There are great concerns regarding virtual currencies and [the] justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” justice minister Park Sang-ki said.
The news sent bitcoin prices tumbling $2,000 from midnight UK time from a high of $14,890, according to data from Coinbase, before beginning to recover in the early hours of the morning.
In South Korea, where bitcoin trades at around a 30% premium compared to other countries, the local price plunged as much as 21% after the minister’s comments.
Once a bill is drafted, legislation for an outright ban of virtual coin trading within South Korea will require a majority vote of the total 297 members of the National Assembly, a process that could take months or even years.
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.
There are more than a dozen cryptocurrency exchanges in South Korea, according to the Korea Blockchain Industry Association. Bitcoin’s 1,500% surge since January 2017 has spurred huge demand from many demographics, from college students to housewives, stoking worries of a growing gambling addiction in the country.
By Thursday afternoon, more than 55,000 South Koreans had signed a petition asking the presidential Blue House to stop the crackdown on the virtual currency, bringing the government website to a halt.
The South Korean-prompted market fluctuation came a day after billionaire investor Warren Buffett said he would never invest in Bitcoin or other cryptocurrencies, and predicted the wildly popular assets are in for a fall.
But many do not share Buffet’s scepticism, with companies such as Kodak rocketing in value by launching new cryptocurrencies and some simply by putting the word blockchain in their name.