S.Korea plans to ban cryptocurrency trading, rattles market (updated)
11/01/2018 05:47
* Police, tax office raid major S.Korean cryptocurrency
exchanges
* Finance ministry focuses on ways to tax cryptocurrency
investors
* CoinMarketCap removed S.Korean exchanges due to wide
premium
(Adds market reaction, details)
By Cynthia Kim and Dahee Kim
SEOUL, Jan 11 (Reuters) - The South Korean government on
Thursday said it plans to ban cryptocurrency trading, sending
bitcoin prices plummeting and throwing the virtual coin market
into turmoil as the nation's police and tax authorities raided
local exchanges on alleged tax evasion.
The clampdown in South Korea, a crucial source of global
demand for cryptocurrency, came as policymaker around the world
struggled to regulate an asset whose value has skyrocketed over
the last year.
Justice minister Park Sang-ki said the government is
preparing a bill to ban trading of the virtual currency on
domestic exchanges.
"There are great concerns regarding virtual currencies and
justice ministry is basically preparing a bill to ban
cryptocurrency trading through exchanges," said Park at a press
conference, according to the ministry's press office.
A press official said the proposed ban on cryptocurrency
trading was announced after "enough discussion" with other
government agencies including the nation's finance ministry and
financial regulators.
Once a bill is drafted, legislation for an outright ban of
virtual coin trading will require a majority vote of the total
297 members of the National Assembly, a process that could take
months or even years.
The government's tough stance triggered a selloff of the
cyrptocurrency on both 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. It still trades at around a 30 percent
premium compared to other countries.
Bitcoin BTC=BTSP was down more than 10 percent on the
Luxembourg-based Bitstamp at $13,199, after earlier dropping as
low as $13,120, its weakest since Jan. 2. urn:newsml:reuters.com:*:nS6N1GM01D
South Korea's cryptocurrency-related shares were also
hammered. Vidente 121800.KQ and Omnitel 057680.KQ , which are
stakeholders of Bithumb, skidded by the daily trading limit of
30 percent each.
Park Nok-sun, a cryptocurrency analyst at NH Investment &
Securities, said the herd behaviour in South Korea's virtual
coin market has raised concerns.
Indeed, bitcoin BTC=BTSP 's 1,500 percent surge last year
has stoked huge demand for cryptocurency in South Korea, drawing
college students to housewives and sparking worries of a
gambling addiction.
"Virtual coins trade at a hefty premium in South Korea, and
that is herd behaviour showing how strong demand is here," Park
said. "Some officials are pushing for stronger and stronger
regulations because they only see more (investors) jumping in,
not out."
RAIDS
There are more than a dozen cryptocurrency exchanges in
South Korea, according to Korea Blockchain Industry Association.
The proliferation of the virtual currency and the
accompanying trading frenzy have raised eyebrows among
regulators globally, though many central banks have refrained
from supervising cryptocurrencies themselves.
The news on South Korea's proposed ban came as authorities
tightened their grip on some of the cryptocurrency exchanges.
The nation's largest cryptocurrency exchanges like Coinone
and Bithumb were raided by police and tax agencies this week for
alleged tax evasion. The raids follow moves by the finance
ministry to identify ways to tax the market that has become as
big as the nation's small-cap Kosdaq index in terms of daily
trading volume. urn:newsml:reuters.com:*:nS6N1M402I
Some investors appeared to have taken preemptive action.
"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.
Bitcoin sank on Monday after website CoinMarketCap removed
prices from South Korean exchanges, because coins were trading
at a premium of about 30 percent in Asia's fourth largest
economy. That created confusion and triggered a broad selloff
among investors. urn:newsml:reuters.com:*:nL1N1P30S9
An official at Coinone told Reuters that a few officials
from the National Tax Service raided the company's office this
week.
"Local police also have been investigating our company since
last year, they think what we do is gambling," the official, who
spoke on condition of anonymity, said and added that Coinone was
cooperating with the investigation.
Bithumb, the second largest virtual currency operator in
South Korea, was also raided by the tax authorities on
Wednesday.
"We were asked by the tax officials to disclose paperwork
and things yesterday," an official at Bithumb said, requesting
anonymity due to the sensitivity of the issue.
The nation's tax office and police declined to confirm
whether they raided the local exchanges.
South Korean financial authorities had previously said they
are inspecting six local banks that offer virtual currency
accounts to institutions, amid concerns the increasing use of
such assets could lead to a surge in crime. urn:newsml:reuters.com:*:nL4N1P31UY
($1 = 1,069.9600 won)
(Reporting by Dahee Kim & Cynthia Kim; Editing by Shri
Navaratnam)
((Dahee.Kim@thomsonreuters.com; +82 2 3704 5643; Reuters
Messaging: dahee.kim@thomsonreuters.com))
Keywords: SOUTHKOREA BITCOIN/