Price of Bitcoin plummeted as news that South Korea may be looking to ban the trading of cryptocurrencies on exchanges. Prices of other cryptocurrencies such as Ethereum are also taking a hit.
This comes days after South Korea's financial institutions were inspected to allow the trading of cryptocurrency.
Ban On Cryptocurrency Trading
On Thursday South Korea's justice minister said that a bill is being prepared to ban the trading of cryptocurrency in the country. Given the volatility of cryptocurrencies, any news can make them rise or fall depending on the type of news.
The value of the currencies may be hit at the moment but it may prove premature. A bill banning cryptocurrency trading would first need to be approved by South Korea's National Assembly. This process could take months or years.
An official for the justice ministry said that the proposed ban came after discussion with other government agencies. This included South Korea's finance ministry and financial regulators. Local prices of Bitcoin in South Korea dropped 21 percent after the comments made by the finance minister.
In South Korea, bitcoin trades at a 30 percent premium compared to other countries. This gap in the trading has been called the "kimchi premium."
Recently South Korea announced that it would end anonymous trading on cryptocurrencies.
Post Comment Surge
Proving just how cryptocurrency fortunes may change on a whim, bitcoin jumped up after plummeting. At the time of writing, it's down five points. Bitcoin initially dropped 12 percent before rising, after reports that the cryptocurrency trading ban isn't finalized.
"It is understandable why the authorities are acting in Korea, which is different to other digital currency markets in several respects. Prices of digital currencies there are much higher than the rest of the world because of local circumstances," said Cedric Jeanson, founder of Bitspread. "Developments like this should be seen in the broader context of the continued evolution and development of digital currencies globally."
South Korea is a major market in cryptocurrency trading, it accounts for between 6 to 12 percent of bitcoin trading. Experts say that these are growing pains while South Korea brings the market into control. It's not about shutting down the system of trading, it's about getting control of the market from those that are pushing the market to its limit by skirting the rules.
South Korea is an example of the headaches government deal with when dealing with cryptocurrencies. As more governments try to bring cryptocurrencies into compliance, the market may shift up or down depending on the rules being instituted.