The government of South Korea have revealed plans to ban cryptocurrency trading causing the virtual coin market to sink even as the nation's tax authorities and police raided local exchanges on allegations of tax evasion.
The clampdown in South Korea, came as policymakers across the globe fight to regulate an investment whose value has continually skyrocketed over the last year.
Justice Minister Park Sang-ki, revealed that the government was making ready a bill which intends to proscribe trading of the virtual currency on domestic exchanges.
A press official at the justice ministry said the proposed ban was announced after serious debate with several government agencies, including the nation’s finance ministry and financial regulators.
Once a bill is drafted, legislation for an total ban of virtual coin trading will require a majority vote of the total 297 members of the National Assembly, a process which could take months or even years to complete.
The government's sturdy position triggered a selloff of the cryptocurrency on both local and offshore exchanges.
The local price of bitcoin plunged as much as 21 percent in midday trade to 18.3 million won ($17,064.53) after the minister’s comments. It still trades around a 30 percent premium compared to other countries.
Bitcoin BTC=BTSP was down more than 10 percent on the Luxembourg-based Bitstamp at $13,199, after earlier dropping as low as $13,120, its weakest since Jan. 2.
South Korea’s cryptocurrency-related shares were also hammered. Vidente (121800.KQ) and Omnitel (057680.KQ), which are stakeholders of Bithumb, skidded by the daily trading limit of 30 percent each.
According to chief analyst at EST Security, Mun Chong-hyun, once enforced, South Korea’s ban will make trading difficult, but not impossible.
“Keen traders, especially hackers, will find it tough to cash out their gains from virtual coin investments in Korea but they can go overseas, for example Japan,” Mun said.
The proliferation of the virtual currency and the accompanying trading frenzy have raised eyebrows among regulators globally, though many central banks have shunned supervising cryptocurrencies themselves.
The nation’s largest cryptocurrency exchanges such as Coinone and Bithumb were raided by police and tax agencies this week for alleged tax evasion. The raids followed moves by the finance ministry to identify ways to tax the market that has become as big as the nation’s small-cap Kosdaq index in terms of daily trading volume.
Some investors appeared to have taken preemptive action and have already cashed most of their virtual coins as they got wind of something coming up.
Bithumb, the second largest virtual currency operator in South Korea, was also raided by the tax authorities on Wednesday.
An official at Bithumb who requested anonymity due to the sensitivity of the issue said “We were asked by the tax officials to disclose paperwork.”
The nation’s tax office and police declined to confirm whether or not they raided the local exchanges.
Reuters
