Cryptocurrencies plunge upon Seoul's 'all-out ban' warning

Cryptocurrencies plunge upon Seoul's 'all-out ban' warning
PHOTO: Reuters

Cryptocurrency markets at home and abroad responded quickly and radically Thursday on signals by South Korea's Ministry of Justice that it would seek to shut down all exchanges for digital assets.

In a press conference Thursday, Justice Minister Park Sang-ki said the government was drawing up a bill against overheating in the virtual currency market, perhaps even intending to ban cryptocurrency trades in Korea completely.

"Cryptocurrency trade in Korea is similar to speculation and gambling," he said, "(Cryptocurrency) does not have a physical denomination. Capital is flying away to virtual currencies. I'm concerned about the bubble burst that would deal a heavy blow to individual investors."

He added that it was a misleading idea that virtual currency trades contribute to the development of blockchain technology.

Park also shot down views that the government was excessively intervening in the market, adding that the US and Japan have also come up with measures to limit transactions.

Following the news, at 5 p.m. Thursday the bitcoin price in Korea had plunged 10.2 per cent from a day prior, according to the nation's largest cryptocurrency exchange Bithumb. A bitcoin was trading at 19.6 million won ($18,300) here. Despite the drop, it was still 33 per cent higher than global price.

In the world stage, the price of bitcoin came to $13,740 at 5 p.m., down 3.2 per cent from a day prior, according to market tracker CoinMarketCap, which has excluded Korean exchanges' prices, citing "extreme divergence in prices from the rest of the world."

Bitcoin had the highest market cap of $230.7 billion among all cryptocurrencies, showed data by CoinMarketCap.

Most other virtual coins turned bearish. Ripple dipped 5.5 per cent, while Ethereum fell 6.7 per cent, as of 5 p.m. on Bithumb.

The Seoul government has been sending strong messages against booming cryptocurrency trades, with authorities raiding offices of exchanges, inspecting commercial banks for accounts and warning of more measures to come against the speculative nature of the cryptocurrencies. It has cited the potential for money laundering, hacking at a major bitcoin exchange and crimes involving cyber money, such as multilevel marketing fraud.

While the government had been cautious of the idea of a complete shutdown, it rolled out plans to tame cryptocurrencies on Dec. 13, followed by the Financial Services Commission's statement that a bill was being authored to ban exchanges' activities as illegal fundraisers.

The latest remarks by the justice minister drew prompt backlash among investors and even ruling party politicians.

Ruling Democratic Party of Korea Rep. Park Young-sun said the ministry was "trying to burn down the barn to get rid of rats."

As Park's conference made headlines at home and abroad, with investors flocking to the Cheong Wa Dae website to register their opposition, the presidential office said that the shutting down of cryptocurrency exchanges was one of the possible measures but that no decision has been made.

"Justice Minister Park Sang-ki's remarks regarding the shutdown of cryptocurrency exchanges is one of the measures that have been prepared by the Justice Ministry, but it is not a finalized decision and will be finalized through discussion and a coordination process with each government ministry," Yoon Young-chan, chief press secretary to President Moon Jae-in, said in a statement.

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