Bitcoin collapses in South Korea as regulator threatens to ban trading

By Park Si-soo

The South Korean government said Thursday it plans to ban cryptocurrency trading.

Justice Minister Park Sang-ki said the government is preparing a bill to ban trading of the virtual currency 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 told 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, a major bitcoin exchange was hacked and incurred heavy losses for many investors. Crimes involving cyber money, such as multi-level marketing fraud using virtual currencies, have also been on the rise.

“It has started to resemble gambling and speculation,” Park said. “The fact that media have 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.”

The minister’s announcement triggered a selloff of cryptocurrency on 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, Reuters said.