On Thursday, South Korea’s government stated that it intends to ban cryptocurrency trading, which resulted in chaos in the virtual coin market sending the price of bitcoin into the ground, as the nation’s police and tax authorities raided local exchanges on alleged tax evasion.
The crackdown in South Korea, a vital foundation of the global demand for cryptocurrency, came as policymakers around the world are having a hard time regulating an asset that’s value went through the roof last year.
Justice minister Park Sang-ki stated that the government was organizing a bill to ban trading of the virtual currency on domestic exchanges. “There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” Park said at a news conference.
Following the market’s reaction to the government announcement, the nation’s Presidential office later said that a ban on the country’s virtual coin exchanges was not finalized, although it was being discussed. A member of the justice ministry stated that the proposed ban on cryptocurrency trading was announced following “enough discussion” with other government agencies, which included the nation’s finance ministry as well as financial regulators.
After the bill is drafted, legislation for a complete ban of virtual coin trading would require a majority vote of the total 297 members of the National Assembly. If this bill comes into fruition, the process could take months or even years.
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The government’s announcement resulted in a selloff of the cryptocurrency on local as well exchanges abroad. The local price of bitcoin dropped as much as 21 percent in midday trade to 18.3 million won.
On the Luxembourg-based Bitstamp, bitcoin lost over 10 percent at $13,199, after falling as low as $13,120 earlier.
Once enforced, South Korea’s ban “will make trading difficult here, but not impossible,” said Mun Chong-hyun, a chief analyst. “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 added.
Park Nok-sun, a cryptocurrency analyst, stated the behavior in South Korea’s virtual coin market has raised some concerns. “Some officials are pushing for stronger and stronger regulations because they only see more (investors) jumping in, not out,” Park said.
By Thursday afternoon, the Justice Ministry’s announcement had encouraged over 55,000 South Koreans to join a petition requesting that the presidential Blue House end the suppression of the virtual currency.