South Korea could be the next country to ban cryptocurrency trading

South Korea could be the next country to ban cryptocurrency trading

"We have grave concerns about [the craze over] virtual currency and [a shutdown] would be one of the goals we are aiming for".

Once enforced, South Korea's ban "will make trading hard here, but not impossible", said Mun Chong-hyun, a chief analyst.

IBD'S TAKE: It is crucial for investors to understand the difference between cryptocurrencies, like Bitcoin, and the blockchain software programs that enable them. Money for industrial growth is being leaked to virtual money trading. "The fact that media have used the phrase "Kimchi premium" reflects foreigners' assessment that the Korean market is abnormal". "Trading at exchanges poses extremely high risks considering its huge volume and frequency", Justice Minister Park Sang-ki told reporters. About exchange closure, there is no difference in views among government offices. The economic impact of any country or government abruptly shutting down its stock market would be in the billions. He also added that "virtual currency" may not be the right term and that he would rather call it "a virtual token". Many of those coins began to pare losses later in the morning. He said that no other large exchanges were under police investigation.

As Park's conference made headlines at home and overseas, 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.

The minister did not disclose any further details on the planned shutdown, but promised to work jointly with the government task force. Korea's government unveiled multiple options for cryptocurrency exchange regulation on December 28, including allowing trading to continue under tighter supervision.

After the first dip as an immediate reaction to the announcement, another statement was made by the SK Presidential office which suggested nothing was final.

Beyond the speculation issue, most likely recent statements were partially motivated by the string of hacking operations that hit the Seoul-based cryptocurrency exchange Youbit past year, with the warning in a statement from December that cryptocurrencies could be "vulnerable to the damage from investment fraud or hacking attacks on exchanges", with Prime Minister Lee Nak-yeon adding in a statement from December that if the speculative trend continues in the country, it could "lead to some serious distorted or pathological phenomenon".

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South Korea's tough stance on cryptocurrency isn't new.

A series of measures have failed to curb overheated virtual currency speculation in the country and Park said it would be "devastating if the bubble bursts".

Two people read tables displayed at Bithumb, the largest cryptocurrency exchange in South Korea, in central Seoul on January 11, 2018.

How much effect the Korean exchange ban will have isn't clear, but Mun Chong-hyun, chief analyst at EST Security, claims that trading in the country won't be impossible.

The crackdown in South Korea, a vital foundation of the global demand for cryptocurrency, came as policymakers around the world are having a hard time regulating an asset that's value went through the roof past year.

But after the more cautious statements from Cheong Wa Dae and the Justice Ministry in late afternoon, the bitcoin price returned to the 20 million won level. Other cryptocurrencies also suffered a fall.

"I have already cashed most of mine (virtual coins) as I was aware that something was coming up in a couple of days", said Eoh Kyung-hoon, a 23-year old investor.

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