South Korea is preparing to shut down cryptocurrency exchanges in the country, its justice minister warned today, sending prices of bitcoin and other virtual units into a tailspin.
The proposed ban has been announced following discussions with other government agencies including the finance ministry and financial regulators, a press official told Reuters. If a bill is drafted, it would still require a majority vote from the 297 members of the National Assembly, which could take months, or even longer. Part of the reason for the clampdown, suggests the government, is the challenge of regulating the sector and, in particular, the use of cryptocurrencies for tax evasion. At 1:26 p.m. HK/SIN, the cryptocurrency price retraced some of its losses to trade at $13,547.7.
'South Korea has always had a premium because it's very hard to get cash out of the country, ' said Dwyer.
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As of midday in NY on Monday, bitcoin was last down 7.1 per cent, at $14,980 on the Luxembourg-based Bitstamp exchange. Vidente and Omnitel, which are stakeholders of Bithumb, skidded by the daily trading limit of 30 per cent each.
"Cryptocurrency trade in Korea is similar to speculation and gambling", he said, "(Cryptocurrency) does not have a physical denomination. The virtual coin market has emerged as a breakthrough of technology over the past year.
The South Korean government has been working on plans for a potential ban on cryptocurrency trading for some time now. This includes over 55,000 of them signing a petition asking the government to reconsider a ban. Bitcoin dropped sharply on the Bitstamp exchange, after South Korea's justice minister said a bill was being prepared to ban cryptocurrency trading. The proliferation of the virtual currency and the accompanying trading frenzy have raised eyebrows among regulators globally, though many central banks have refrained from supervising cryptocurrencies themselves. Korea's government unveiled multiple options for cryptocurrency exchange regulation on December 28, including allowing venues to operate under tighter supervision. The exchange disputed a Reuters report that its offices had been raided by tax and police agents. While this news isn't good for investors of virtual currencies, it also doesn't mean that a ban is a sure thing. This is because many exchange sites do not allow any new accounts. Moreover, it created confusion and gave rise to huge selloff among investors.
One cryptocurrency expert, when asked to comment on the current unfolding of events, said the Coinone and Bithumb investigations may open the floodgates of government inspection. This has raise a big concern that the South Korean crackdown will erode one of the world's biggest sources of demand for digital currencies.
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