South Korea is preparing to shut down cryptocurrency exchanges in the country, its justice minister warned Thursday, sending prices of bitcoin and other virtual units into a tailspin.
A series of measures have failed to curb overheated virtual currency speculation in the country and Justice Minister Park Sang-Ki said it would be “devastating if the bubble bursts”.
“The ministry is preparing legislation that basically bans any transactions based on a virtual currency through the trading floor,” he told journalists. Authorities had “grave concerns” over the craze and were “aiming to close virtual currency exchanges” in the country, he said. “It has started to resemble gambling and speculation,” Park added. The hyper-wired South has emerged as a hotbed for cryptocurrency trading, accounting for some 20 percent of global bitcoin transactions about 10 times the country’s share of the world economy. Park’s remarks sent bitcoin prices plunging 18 percent on South Korean exchange Bithumb, while ethereum slumped 23 percent. Bithumb, one of around 20 virtual currency exchanges in South Korea was raided by tax authorities on Wednesday who inspected the company’s documents. On the same day financial authorities inspected six local banks that offered virtual accounts for corporate customers.
Last month Seoul banned its financial firms from dealing in virtual currencies. Two weeks later, it announced a ban on opening anonymous cryptocurrency accounts and a crackdown on money laundering activities using them. It has also warned most cryptocurrencies were being traded in South Korea at far higher prices than elsewhere in the world, blaming factors including “blind speculation”. An official at the Financial Supervisory Service, South Korea’s top financial regulator, said the closure of local exchanges represented a “very strong measure” against virtual coins. The move would “effectively suffocate” cryptocurrency transactions within the country by creating “enormous obstacles” for traders. US billionaire investor Warren Buffet told CNBC on Wednesday the global craze over bitcoin and other cryptocurrencies would meet a “bad ending”. “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” told financial TV channel CNBC, but added: “When it happens or how or anything else, I don’t know.” The price of bitcoin surged in 2017 from a low of around $750 in early January to a record above $19,500 in mid-December, before tumbling on global exchanges, according to Bloomberg News. It bought around $13,500 in afternoon trade Thursday.