Bitcoin collapses as South Korea threatens to ban trading

By Park Si-soo

The prices of bitcoin and other virtual currencies plummeted more than 10 percent after South Korea floated the idea of banning cryptocurrency trading.

The announcement on Thursday triggered an immediate selloff of cryptocurrencies on Korean and offshore exchanges. As of 4 p.m., the price of bitcoin dropped 11.62 percent to 14.15 million won ($13,205).

Earlier, Justice Minister Park Sang-ki said the government is preparing a bill to ban trading of virtual currencies on domestic exchanges.

"The ministry is preparing legislation that basically bans any transactions based on a virtual currency through the trading floor," Justice Minister Park Sang-ki said at a press briefing. "We have grave concerns about (the craze over) virtual currency and (a shutdown) would be one of the goals we are aiming for."

His remarks are in line with the government's stern resolve to tackle the irrational cryptocurrency market here that many observers now say has reached a critical level. Recently, hackers attacked a major bitcoin exchange, incurring heavy losses for many investors. Crimes involving cyber money, such as multi-level marketing fraud using virtual currencies, have also been on the rise.

"Now, it is more like gambling or speculation," Park said. "The fact the media has used the phrase kimchi premium reflects foreigners' assessment that the Korean market is abnormal."

A ministry official said the proposed ban was announced after "enough discussion" with other government agencies, including the nation's finance ministry and financial regulators, according to Reuters.

The minister warned of social repercussions that might come from tremendous potential financial losses if the market begins to collapse.

"Virtual currency is not based on an exchange of something with a certain value," he said. "It'd be devastating if the bubble bursts after all the money that should've been invested vanishes as virtual currency."