South Korea Considers Shuttering Bitcoin Exchanges in Crackdown on Cryptocurrency Trading
South Korea’s government announced tougher measures to crack down on cryptocurrency trading in the country and said it is considering shutting down the nation’s bitcoin exchanges, stepping up its attempts to curb widespread investor speculation fueling the market.
New proposed legislation in Korea will ban the use of anonymous cryptocurrency accounts starting next month and prevent banks from providing settlement services for unidentified digital-currency trades on bitcoin exchanges, according to a statement from the government on Thursday.
The government also cautioned that digital currencies could be “vulnerable to the damage from investment fraud or hacking attacks on the exchanges.”
Last week, Youbit, a Seoul-based cryptocurrency exchange, suspended trading and filed for bankruptcy after it was hacked a second time in eight months and lost a chunk of its digital currency reserves. Investigators in South Korea are looking into North Korea’s possible involvement after the exchange collapsed.
The price of bitcoin fell after the new measures were announced Thursday morning in Asia. Bitcoin recently traded at $13,800, according to research site CoinDesk. It has lost more than one-fourth of its value since hitting an all-time high near $20,000 earlier this month.
Many Koreans, young and old, have taken to bitcoin and other cryptocurrencies, helping fuel their massive rise in value this year. At one point earlier this month, South Korea accounted for as much as one-fourth of global bitcoin trading activity, according to data firm Coinhills.
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The investor frenzy has worried the country’s authorities, who have raised concerns about growing speculation and the risk investors could lose money from sharp price declines or from cyber attacks on digital currency exchanges. The country’s prime minister Lee Nak-yon has also warned that rising interest in cryptocurrencies could “lead to some serious distorted or pathological phenomenon.”
In its statement, the government said it “can’t leave the abnormal situation of speculation any longer” and said “cryptocurrency speculation has been irrationally overheated” in Korea. It said officials from the Justice Ministry could propose legislation that would shut down cryptocurrency exchanges nationwide, but didn’t elaborate on when this might happen.
The new measures mark the second time in less than a month that South Korean authorities have proposed curbs on the industry. At an emergency meeting in mid-December, government officials said they would levy capital-gain taxes on trading cryptocurrencies and restrict financial firms from holding, acquiring and investing in them.
At a news conference a day earlier, the head of South Korea’s financial watchdog warned against the rapid increase in the prices of digital currencies.
“I bet the bubble in bitcoin will burst later,” Choe Heung-sik, governor of the Financial Supervisory Service, said at the press conference on Wednesday, according to state news agency Yonhap.
Bitcoin started the year trading at about $1,000. While it has surged in value, it also has experienced several sharp pullbacks throughout the rally. Bitcoin started the month at about $10,000 and surged to nearly $20,000 before falling sharply around the Christmas holiday.
Regulators in other countries have also taken recent steps to caution investors against buying into the hype surrounding digital currencies.
The Financial Industry Regulatory Authority in the U.S. last week warned investors of cryptocurrency-related stock scams. The regulatory body said people should be “cautious when considering the purchase of shares of companies that tout the potential of high returns associated with cryptocurrency-related activities without the business fundamentals and transparent financial reporting to backup such claims.”
The Finra alert was updated on the same day that an obscure American company previously called Long Island Iced Tea Corp. changed its name to Long Blockchain Corp. Shares surged 183% following the change.
Israeli authorities earlier this week said they would propose regulation that would ban companies that trade bitcoin and other cryptocurrencies from listing on the Tel Aviv stock exchange. At least two Israel-listed companies, Blockchain Mining Ltd. and Fantasy Network Ltd., recently said digital currencies or blockchain technology are essential to their operations, causing their share prices to spike.
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(END) Dow Jones Newswires
December 28, 2017 03:28 ET (08:28 GMT)