South Korea's Crackdown on Cryptocurrency

Finance: Here's why cryptocurrencies are getting smoked on Monday

South Korean Cryptocurrency Mania: Exchanges are Adding More Employees Than Banks

That sounds like awful news but Bitcoin is down only about 5% to $13,800.

Ethereum, which is also very popular in South Korea, also dropped 14 percent on the news. Vidente and Omnitel, which are stakeholders of Bithumb, skidded by the daily trading limit of 30 percent each.

However, bitcoin and other currencies paired some losses after the South Korean Presidential office said a ban hasn't yet been finalized, it is among several options to be considered. Reuters reported soon after that the Justice Ministry had said that a bill was forthcoming.

Huge demand for bitcoin was triggered in late 2017, after the currency's value surged from around $1,000 per coin at the start of the year to nearly $20,000 by December, before falling to its current value of around $13,600.

A Chinese ban on virtual coin transactions in yuan ended up driving many investors underground, exposing them to greater risks, he said.

According to prices compiled by Bloomberg, Bitcoin prices rose by much as 8.6 percent following the news break. Among the top 10 most traded cryptocurrencies, ethereum - which has gained 10% in a rally since Saturday - was the biggest loser.

While the specific details of the law aren't known at this time, it's believed that the new law will allow the South Korean government to shut down crypto exchanges.

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In addition to the announcement of the bans, South Korean cryptocurrency exchanges reportedly got a nasty surprise recently when police and tax officials reportedly raided their offices.

He added that it was a misleading idea that virtual currency trades contribute to the development of blockchain technology. Just as the year started, it was reported on January 2 that US-based entrepreneur and venture capitalist Peter Thiel may have invested $15 million to $20 million of his Founders Fund into Bitcoin in early 2017.

Bitcoin and other digital currencies are trading at a 30% premium in South Korea, while the Justice Minister's comments plunged prices nearly 20%. That created confusion and triggered a broad selloff among investors.

However, the impact will be felt by South Korean local exchanges, a few of which are being investigated by authorities according to Bloomberg.

A crackdown on cryptocurrency in China forced investors to turn to South Korea and Japan, now the two main sources of global demand for Bitcoin and other virtual currencies.

An official at Bithumb told the press, "We were asked by the tax officials to disclose paperwork", while Coinone says it is cooperating with investigative efforts.

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