The government of South Korea bared its plans to bar cryptocurrency trading.
The announcement by South Korea sent ripples across the market and sent bitcoin prices plummeting as the nation’s police and tax authorities raided local exchanges on alleged tax evasion.
The crackdown in South Korea, a major source of global demand for cryptocurrency, arrived as policymakers around the world had a hard time to regulate an asset whose value has surged over the last year.
Justice minister Park Sang-ki relayed the government was working on a bill to ban trading of the virtual currency on domestic exchanges.
“There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” Park said during a news conference.
After the market’s steep reaction to the announcement, the nation’s Presidential office hours clarified later that a ban on the country’s virtual coin exchanges had not been finalized.
The office further clarified that it was one of the measures being considered.
An official went on to say that the proposed ban on cryptocurrency trading was declared after “enough discussion” with other government organizations, including the nation’s finance ministry and financial regulators.
Once a bill is drafted, legislation for an outright ban of virtual coin trading would need a majority vote of the total 297 members of the National Assembly.
It is a process that could take months or even years.
Announcement Drives Bitcoin Market Down
The government’s tough stance triggered a selloff of the cryptocurrency on both local and offshore exchanges.
The local price of bitcoin dropped as much as 21% in midday trade to 18.3 million won after the minister’s comments.
It still trades at around a 30 percent premium compared to other countries.
Bitcoin BTC=BTSP was down more than 10% on the Luxembourg-based Bitstamp at $13,199, after earlier dropping as low as $13,120, its weakest since Jan. 2.
Indeed, bitcoin’s BTC=BTSP 1,500 percent surge last year has sparked huge demand for cryptocurency in South Korea, driving college students to housewives and sparking worries of a gambling addiction.
By Thursday afternoon, the Justice Ministry’s announcement had prompted more than 55,000 South Koreans to join a petition asking the presidential Blue House to halt the crackdown on the virtual currency, making the Blue House website intermittently unavailable due to heavy traffic, the website showed.
