The price of bitcoin dipped by 14 percent — more than $2,000 — early Thursday after South Korea’s government announced proposals to ban all cryptocurrency trading.
It wasn’t just bitcoin that slumped. More than $100 billion was wiped off the value of all cryptocurrencies over the proposed legislation.
The price declined so sharply because South Korea is a major global hub for virtual currency transactions, accounting for as much as 20 percent of all bitcoin trading in recent months. More than one third of all South Korean adults hold some form of cryptocurrency.
"There are great concerns regarding virtual currencies and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges," Justice Minister Park Sang-ki said at a press conference.
The announcement came after two of South Korea’s biggest cryptocurrency exchanges, Coinone and Bithumb, were raided by police and tax authorities Wednesday for alleged tax evasion, Reuters reported.
Prior to the announcement, bitcoin’s price was touching $15,000. It quickly plummeted to $12,800 before recovering slightly to $13,300. This high volatility is one reason many critics have said virtual currency will never replace fiat currency.
A follow-up statement from the South Korean president’s office tried to soften the announcement, saying that a trading ban was just one of the measures being considered and nothing had been finalized.
Some South Korean investors have paid up to 40 percent more than international buyers for bitcoin, such is the high demand. This has led to concerns of exploitation.
The bill to ban cryptocurrency trading will require a majority vote of the 297 member National Assembly, and given the level of interest it could face stiff opposition. The bill could take months if not years to come into law.
South Korea is not the only country struggling to reign in the cryptocurrency explosion, with governments across the globe scrambling to understand the phenomenon and how to regulate it.