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Bitcoin and all other cryptocurrency markets are bleeding since Reuters broke news earlier today that South Korea might be preparing to ban trading of all cryptocurrencies on domestic crypto exchanges. But how likely is that?
To take things from the start, here's what happened. According to Reuters, South Korea's Justice Minister Park Sang-Ki said at a press conference:
“There are great concerns regarding virtual currencies, and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges.”
This week had already been negative for cryptocurrencies, as CoinMarketCap excluded South Korean exchanges from their averages as there was extreme divergence in prices from the rest of the world and limited arbitrage opportunity. As a result, the price of Bitcoin, Litecoin and Ripple's XRP had taken a hit except for Ethereum that had recovered later.
However, more details are required before it can be confirmed if this is indeed the plan. Because it has already been made clear by South Korea’s Financial Services Commission earlier that the regulator has drafted a separate policy on trading in cryptocurrencies, which was under discussion at the National Assembly. Hence, it appears that what South Korean authorities want is strict regulation, not closure.
So, it is not like the exchanges are being closed down today or even this week or the next. Moreover, South Korean authorities have been taking steps for quite some time now to clamp down on the frenzy that has swept even the housewives and students who are dreaming of getting rich quick.
As we have written earlier, the South Korean financial authorities were taking steps to control the speculation in Bitcoin. Few steps that were announced was using real names instead of anonymous names, prohibiting minors and foreigners from opening accounts and introducing taxes on cryptocurrency transactions. Bitcoin, the most popular digital currency, had taken a hit as a result of these developments and Ripple XRP price had soared.
Following these steps, what the South Korean authorities have done now is visiting few exchanges to check details of their cryptocurrency transactions. They have also been inspecting banks to ensure that they were complying with the anti-money laundering rules.
In all likelihood, the exchanges that may not be complying with KYC regulation or not paying proper taxes would be the ones that would face closure. And gradually, BTC price together with ETH price, XRP and LTC price should recover in the coming days.
As the cryptocurrency mania takes over the world, authorities are trying to understand and control it so that it does not disrupt other markets and functioning of other financial institutions. A South Korean cryptocurrency had filed for bankruptcy last month after it was hacked twice.
The authorities are worried over such incidents, and the traders’ addiction, which borders on gambling, as some South Korean crypto traders may even be putting in their life savings to trade in digital coins. In case of a crypto market crash, the repercussions would definitely be ominous.
The authorities clearly want to avoid such a scenario and therefore planning steps to stop this heightened speculation and herd behavior. However, an outright closure of crypto exchanges looks unlikely, and we shall wait for more news inflow to clarify this matter.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.