The value of bitcoin has dropped 13.5 per cent following news that South Korea may ban trading of all cryptocurrencies. But in a volatile market, it’s far from a short-term play.
Earlier this week local police raided cryptocurrency exchanges amidst fears the technology was being used for tax evasion. Justice minister Park Sang-ki said cryptocurrencies were causing “great concern” and that the government was preparing a bill to ban trading on domestic exchanges. A wave of online protests followed, with officials later clarifying that an outright ban was only one option being considered.
The hastily-reported comments, and subsequent clarification, are typical of bitcoin’s rollercoaster existence. Interest is so high that its value continues to fall and rise erratically, with the cryptocurrency quickly recovering in later trading.
Before taking action as drastic as a total ban on all trading, the South is more likely to block foreigners, institutions and minors from owning and trading cryptocurrency. Police raids on exchanges also follow earlier statements from regulators that they may tax capital gains from crypto trading.
Read more: Six ways to regulate cryptocurrency without killing it
The initial sharp drop, equivalent to around $2,000 (£1,484), is a result of South Korea being the world’s third-largest cryptocurrency trading market. High demand in the country means bitcoin often trades at a 40 per cent premium on local exchanges compared to other markets.
Any bill to ban trading would need to pass the National Assembly, a process that could take many months or years. But if any nation needs to get a grip on the cryptocurrency surge it’s South Korea. Park said trading was now akin to “speculation and gambling” and warned it may “inflict serious financial damage on citizens”.
Tax evasion aside, that’s a major worry. Bitcoin has surged 1,500 per cent since January 2017, moving from a niche interest to a mainstream investment opportunity. (Bitcoin alternatives are available). As frenzied trading intensifies, officials in the South are clearly desperate to get a grip.
But they may not have to. Billionaire investor Warren Buffett told CNBC that cryptocurrencies generally “come to a bad ending”. Ultimately, bitcoin may end up crashing – or at least stabilising – long before South Korea gets a grip on regulating it.
This article was originally published by WIRED UK
