Bitcoin Struggles as South Korean Ban Pushes Forward

Bitcoin Struggles as South Korean Ban Pushes Forward

The Korean government said on January 11 it is preparing a bill to ban cryptocurrency transactions at exchanges, throwing the virtual money market into turmoil.

The justice minister said virtual currencies were causing the government "great concern".

Any bill to ban trading would need to pass the National Assembly, a process that could take many months or years.

The government's tough stance triggered a selloff of the cryptocurrency on both local and offshore exchanges.

A survey conducted by the Income Tax Department has revealed that there are six lakh active traders of cryptocurrencies such as Bitcoin in nine digital currency exchanges across India, while 25 lakh people are registered to trade, The Indian Express reported on Thursday. For ethereum, this figure is higher at around 14 percent.

"It has started to resemble gambling and speculation", Park added, citing the fact that bitcoin prices are higher in South Korea than globally - the so-called "kimchi premium". The Financial Services Commission of Korea has previously banned ICOs, trading in bitcoin futures, and anonymous crypto trading accounts.

But a cryptocurrency analyst said he was "sceptical" that the justice ministry' proposal would go into force because of strong market resistance.

Indeed, bitcoin's 1,500 percent surge past year has stoked huge demand for cryptocurency in South Korea, drawing college students to housewives and sparking worries of a gambling addiction.

But after the more cautious statements from Cheong Wa Dae and the Justice Ministry in late afternoon, the bitcoin price returned to the 20 million won level.

While the specific details of the law aren't known at this time, it's believed that the new law will allow the South Korean government to shut down crypto exchanges.

The decision comes after several government measures, including real-name transactions, have had little impact in cooling the overheated virtual money market here, the world's third-largest in terms of trading volume.

Investors in the country are preemptively reacting to the proposed ban.

The price of bitcoin dropped sharply on Thursday after South Korea said it planned to ban trading in cryptocurrencies. Moreover, it created confusion and gave rise to huge selloff among investors. The exchange disputed a Reuters report that its offices had been raided by tax and police agents.

It also claims that authorities performed "raids" at major exchanges Coinone and Bithumb.

"We were asked by tax officials to disclose paperwork and things yesterday", an official at Bithumb told Reuters on the condition of anonymity.

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