In a sudden reversal of policy, the South Korean government announced on Thursday that a bill is afoot banning anonymous cryptocurrency trading, sending a ripple effect across the digital currency market as police and tax authorities raided exchanges on suspicion of tax evasion.
Bitcoin prices plunged on Thursday by almost 14 per cent, after South Korea intensified its crackdown on virtual currencies and considers a ban on all cryptocurrency trading in the country, one of the world's largest bitcoin markets. According to Reuters, legislation for the bill will require a majority vote of the total 297 members of the National Assembly, a process that could take months or even years. Last month, 2% of all South Korean citizens owned at least some cryptocurrency, buying with such frequency that Bitcoin often sells at a 40% higher price there than on USA exchanges.
To sum the situation up, hours after Park Sang-ki's comments, a representative of President Moon Jae-in told Korean media [link in Korean] that the Justice Ministry's position does not reflect that of the entire government.
The Indian finance ministry recently cautioned investors about the risks of trading in cryptocurrencies such as bitcoin, saying digital currency investments are like "Ponzi schemes". In response to the news, the price of bitcoin in South Korea dropped by $2,000 this morning. In Dec. 2017, the country made it more hard to trade cryptocurrencies anonymously, threatening the possibility to ban cryptocurrency trading altogether.
However, South Korea's presidential office said a ban on the nation's virtual coin exchanges had not yet been finalized.
Many analysts believe that the infatuation for cryptocurrencies in South Korea causes concerns of gambling, especially as bitcoin demand surged and the price skyrocketed in the past one year. For ethereum, this figure is higher at around 14 percent. In its statement from December, the government hinted at the idea of an outright ban of cryptocurrency exchanges.
According to reports, South Korean officials were also targeting banks that offer cryptocurrency accounts, citing a rise in crime as their reasoning.
We were asked by the tax officials to disclose paperwork and things yesterday.
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.
The nation's tax office and police declined to confirm whether they raided the local exchanges.
Regulators are taking a keener interest in the cryptocurrency world.