South Korea may shut down crypto-currency exchanges amid speculation ‘frenzy’
Seoul/Hong Kong — Bitcoin resumed its tumble on Thursday after South Korea said it was eyeing options that include a potential shutdown of at least some crypto-currency exchanges to stamp out a frenzy of speculation.
South Korea has been ground zero for a global surge in interest in bitcoin and other digital currencies as prices surged this year, prompting the nation’s prime minister to worry over the impact on Korean youth. While there’s no indication that Asia’s fourth-largest economy will shutter exchanges that have accounted, by some measures, for more than a fifth of global trading, the news is a warning as regulators express concerns about private digital currencies.
Bitcoin fell as much as 9% to as low as $13,828 in Asia trading, erasing modest gains after the South Korean release, composite Bloomberg pricing shows. The crypto-currency had retraced some of its losses by 1.57pm in London, trading down 5.4% to $14,371. This puts the drop from a record high reached last week at about 26%.
South Korea will require real-name crypto-currency transactions and impose a ban on the offering of virtual accounts by banks to crypto-exchanges, according to a statement from the office for government policy co-ordination. Policy makers will review measures, including the closure of crypto-exchanges suggested by the ministry of justice, and take proper measures swiftly and firmly while monitoring the trend of the speculation.
Bitcoin was trading at about a 30% premium over prevailing international rates on Thursday in Seoul, according to price data from local exchanges, a continuing sign of the country’s obsession, and the difficulty in arbitraging between markets.
"Crypto-currency speculation has been irrationally overheated in Korea," the government said in the statement, which comes little more than a week after the bankruptcy filing of one South Korean exchange. "The government can’t leave the abnormal situation of speculation any longer."
Singapore’s monetary authority warned last week that digital-currency buyers should be aware they could lose all their money, joining counterparts who’ve warned about speculative mania surrounding bitcoin, which has surged more than 1,300% this year.
"Regulators are getting so concerned that this is primarily and predominantly a retail phenomenon," said Stephen Innes, head of trading for Asia Pacific at Oanda. "Regulators, not only in Asia but globally, are going to start addressing this fact because I don’t think they’ve actually come to terms with what the absolute downside of a complete drop in ‘crypto’ means for the economy."