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South Korea scares Bitcoin buyers with 'ban' on virtual currency trading

Thursday, 11 January, 2018

South Korea's government has indicated it may prohibit domestic trading of Bitcoin and other cryptocurrencies, according to news agency reports.

Justice Minister Park Sang-ki told news agency Reuters that the government has 'great concerns regarding virtual currencies', and is 'basically preparing a bill to ban cryptocurrency trading through exchanges'. At the same time, reports appeared of raids on local virtual currency exchanges by the South Korean law enforcement authorities searching for evidence of tax evasion. CoinOne and Bithumb, the two largest, were both approached by tax officials demanding documents. Last week, the country's financial regulators said they were inspecting six local banks that offer virtual currency trading accounts to institutions.

The putative ban has already been agreed in discussions with the Finance Ministry and financial regulators, a Justice Ministry official told Reuters. However, to take effect it would need to be approved in the National Assembly.

The announcement appears to have created volatility in Bitcoin trading, but there is nothing unusual about that. Though Bitcoin's value has increased sharply in the past year, there have been many ups and downs along the way, as large numbers of inexperienced retail investors have been drawn into the market. Many institutions and governments worldwide have warned that a collapse may be imminent.

Whether or not a ban is really planned, the Seoul government certainly has plans for tighter regulation. Last month it established a joint task force on cryptocurrency regulation, with plans to tax cryptocurrency transactions and impose a dealing ban on minors and foreigners.

'The government seems to have recognised that the cryptocurrency market, which has recently become overheated, has become a place of speculation', said the Seoul office of law firm Yulchon. 'Therefore it has decided to impose tax on cryptocurrency transactions as a means of suppressing speculation.'