David BurrowsThe South Korean government plan to ban cryptocurrency trading has sent bitcoin prices plummeting.
The clampdown in South Korea, a crucial source of global demand for cryptocurrency, came as policymakers around the world struggled to regulate an asset whose value has skyrocketed over the last year.
Justice minister Park Sang-ki said the government is preparing a bill to ban trading of the virtual currency on domestic exchanges, Reuters reports.
A government press official said the proposed ban on cryptocurrency trading was announced after “enough discussion” with other government agencies including the nation’s finance ministry and financial regulators.
Price plunge
The government’s tough stance triggered a selloff of the cryptocurrency on both local and offshore exchanges.
The local price of bitcoin plunged as much as 21% to 18.3 million won ($17,064.53) after the minister’s comments. It still trades at around a 30% premium compared to most other countries.
South Korea’s cryptocurrency-related shares were also hammered. Vidente and Omnitel, which are stakeholders of Bithumb, saw their share prices slide.
Park Nok-sun, a cryptocurrency analyst at NH Investment & Securities, said the herd behaviour in South Korea’s virtual coin market has raised concerns.
Gambling addiction
Indeed, bitcoin’s 1,500 percent surge last year has stoked huge demand for cryptocurency in South Korea, drawing college students to housewives and sparking worries of a gambling addiction.
Virtual coins trade at a hefty premium in South Korea, and that is herd behaviour showing how strong demand is here,” Park told Reuters.
He added: “Some officials are pushing for stronger and stronger regulations because they only see more (investors) jumping in, not out.”