The price of Bitcoin has plummeted by more than 9% after it emerged that South Korea is preparing a bill to ban the trade of virtual currencies in the country. Other cryptocurrency prices, including Ethereum and Ripple, have also dived following the news.
Ethereum, the second-largest cryptocurrency by market cap, saw its price drop by 5%. Ripple, the third-largest, was down 15 percent, according to Coindesk.
South Korea has become a hotbed for trading virtual currencies, accounting for around 20% of all global Bitcoin transactions – but that’s brought about a number of challenges for the government.
There are more than a dozen cryptocurrency exchanges in South Korea, according to the Korea Blockchain Industry Association, with several being raided this week in a probe into alleged tax evasion.
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The clampdown in South Korea is believed to be in response to decisions made by global policymakers, who have struggled to regulate the slew of new virtual currencies, including Bitcoin and Ripple.
Justice Minister Park San-ki said the nation was preparing a bill to ban the trading of cryptocurrencies on domestic exchanges, before revising his statement to stress that its decision has not yet been finalised.
“There are great concerns regarding virtual currencies and the Justice Ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” Park told local press on January 10.
So, it’s not set in stone that trading is definitely going to be banned – and that’s because the government is reportedly toying with other ideas to regulate activity, like clamping down on unlicensed exchanges.
“The position is that the Korean authorities are clamping down on unregulated exchanges and exchanges that are not compliant,” explained Ran Neuner, host of CNBC‘s Cryptotrader show, on Twitter.
“Further, they are auditing the quality of the KYC (Know Your Customer). A ban is not on the cards,” Neuner added.
It’s all a bit of a mess, but one thing’s for certain: South Korea has a lot of influence in the virtual currency market, and if it decides to ban trading, you can expect the value of your tokens to drop – as evidenced by the sudden downturn which, ultimately, was merely the result of speculative reports.
As ever, exercise caution if investing in cryptocurrencies. Despite the current vogue for digital monies, they remain highly volatile and – as with any investment – you should be aware of the risk involved.
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