Bitcoin price fell more than 11 percent after South Korea yesterday said it would ban anonymous trading of virtual currencies and crack down on money laundering activities using them.
The announcement came as the hyper-wired South Korea emerged as a hotbed for cryptocurrency trading, accounting for about 20 percent of global bitcoin transactions — about 10 times the country’s share of the world economy.
The new rules announced by Seoul include a ban on opening anonymous cryptocurrency accounts and new legislation to allow regulators to close virtual currency exchanges if necessary.
“Officials share the view that virtual currency trading is overheating irrationally ... and we can no longer overlook this abnormal speculative situation,” the government said in a statement.
Anonymous accounts in use are to be closed next month, it added.
The policy package includes stepping up crackdowns on money laundering activities and financial fraud — including price manipulation — using digital currency trades.
“We will ... resolutely respond to such crimes by slapping the maximum sentences possible on offenders,” it said, vowing to “leave all policy options open, including closure of a cryptocurrency exchange when deemed necessary.”
The announcement came two weeks after Seoul banned financial firms from dealing in virtual currencies — most notably bitcoin — as their prices soared, sparking concerns of a bubble largely fueled by retail speculators.
The digital unit hit a record of about US$19,500 earlier this month, meaning it had increased more than 25-fold from its low in the middle of January.
About 1 million South Koreans, many of them small-time investors, are estimated to own bitcoin. Demand is so high that prices for the unit are about 20 percent higher than in the US, its biggest market.
Seoul yesterday warned that most cryptocurrencies are being traded in the country at prices far higher than elsewhere in the world, blaming factors including “blind speculation.”
The price of bitcoin fell 11.6 percent to US$13,827 after yesterday’s announcement.
In a case highlighting the risks of cryptocurrency, a Seoul virtual currency exchange last week declared itself bankrupt after being hacked for the second time this year.
The Youbit exchange became the first South Korean cryptocurrency exchange to close after a hacking attack that stole 17 percent of its assets.
There have been numerous warnings about a possible blowout in the bitcoin market.
Bank of Japan Governor Haruhiko Kuroda last week said the price surge of the virtual currency was “abnormal.”
Meanwhile, the Monetary Authority of Singapore, the city-state’s central bank, has advised investors to “act with extreme caution.”
European Central Bank Vice President Vitor Constancio has also expressed concern about the relentless rise in the value of bitcoin and the potential risk accompanying the trend.
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