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South Korea planning to close cryptocurrency exchanges, bitcoin dives

12 January 2018

As part of a major crackdown on tax evasion, the South Korean tax authorities recently raided several local cryptocurrency exchanges.

The ministry is preparing a bill that would outlaw cryptocurrency trading via exchanges, South Korean Minister of Justice Park Sang-ki told reporters yesterday.

Once a bill to ban bitcoin - and other cryptocurrencies like litecoin and ethereum - has been drafted, moving the ban into law would require a majority vote from the 297 members of the National Assembly, a process which Reuters says could take months or even years. The move comes after the prices of bitcoin, Ethereum, and other top digital currencies were priced higher in South Korean exchanges compared to the rest of the world. There are now about 20 virtual currency exchanges in the country, with the monthly turnover of the top bourse at 56 trillion won (US$52.2 billion) as of December. It is also important to get a feel for just how speculative digital monies like Bitcoin are right now before investing directly in the currencies or through related exchange traded funds or stocks.

The news sent bitcoin prices tumbling $2,000 from midnight United Kingdom time from a high of $14,890, according to data from Coinbase, before beginning to recover in the early hours of the morning. 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. As the world's third largest digital currency, high demand has seen South Korean traders paying premiums of more than 40% over worldwide rates for Bitcoin.

Many analysts believe that the infatuation for cryptocurrencies in South Korea causes concerns of gambling, especially as bitcoin demand surged and the price skyrocketed in the past one year.

"Some officials are pushing for stronger and stronger regulations because they only see more (investors) jumping in, not out", Park said. This recent news definitely won't quell bubble murmurings any time soon.

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According to reports, South Korean officials were also targeting banks that offer cryptocurrency accounts, citing a rise in crime as their reasoning.

But the MSF disagreed, saying, "We do not share the same views as the Ministry of Justice on a potential cryptocurrency exchange ban".

The nation's tax office and police declined to confirm whether they raided the local exchanges.

An unidentified spokesman told the Financial Times: "They asked for some data such as cryptocurrency trading volume, our exchange's sales and whether we are paying corporate tax well".

Meanwhile South Korean authorities are investigating six banks now offering virtual currency accounts that have possible links to money laundering.

South Korea planning to close cryptocurrency exchanges, bitcoin dives