South Korea Cryptocurrency Crackdown: Cryptocurrency Trading May Be Banned

South Korea Cryptocurrency Crackdown: Cryptocurrency Trading May Be Banned

South Korea Cryptocurrency Crackdown: Cryptocurrency Trading May Be Banned

Bitcoin and other virtual currencies were sent on rollercoaster rides in South Korea Thursday as the government said it was planning to ban cryptocurrency exchanges, before later backtracking.

Hong Kong - Bitcoin slumped to its lowest level since Christmas day as South Korea's justice minister reiterated his proposal to ban local cryptocurrency exchanges, fuelling concern a state crackdown will erode demand for digital coins in one of the world's biggest markets. The proposed legislation will need a majority vote of all 297 members of the National Assembly in order to ban trading outright.

The price of bitcoin dropped sharply on Thursday after South Korea said it planned to ban trading in cryptocurrencies. Some compare it to gambling which could attribute to South Korea's substantially higher exchange prices. Cryptocurrencies are not legal tender and have no regulatory permission or protection in the country, the finance ministry said in a statement.

Cryptocurrencies such as Bitcoin and Ethereum are traded through exchanges, some of which have recently been raided by authorities after allegations of tax evasion.

How much effect the Korean exchange ban will have isn't clear, but Mun Chong-hyun, chief analyst at EST Security, claims that trading in the country won't be impossible.

South Korea is one of the major cryptocurrency trading markets. For ethereum, this figure is higher at around 14 percent.

A Chinese ban on virtual coin transactions in yuan ended up driving many investors underground, exposing them to greater risks, he said.

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The statement came after hundreds of apparent investors in virtual currency rushed to the website of Cheong Wa Dae, posting more than 1,000 petitions against a possible shutdown of cryptocurrency exchanges.

But the cryptocurrency quickly recovered and traded at $13,647.90 at 1:30 pm UTC, data from CoinMarketCap showed.

"Virtual currency is not based on an exchange of something with a certain value", he said.

According to reports, South Korean officials were also targeting banks that offer cryptocurrency accounts, citing a rise in crime as their reasoning. The exchange, however, denied a Reuters report that its offices had been raided.

An official at Bithumb told the press, "We were asked by the tax officials to disclose paperwork", while Coinone says it is cooperating with investigative efforts.

Earlier this week, South Korean authorities begun inspecting six banks to check wether they were requiring real names for accounts and following rules against money laundering.

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