South Korea is one of the biggest markets for cryptocurrency, specifically Ethereum and Bitcoin. On Thursday, January 11, 2018, their justice minister claimed a bill is being prepared that would ban cryptocurrency trading within the country.
The news resulted in Bitcoin dropping by 12% and Ethereum by 7.6% which had some investors concerned. More than 10% of all Ethereum is traded against South Korea won and 5% of all Bitcoin is traded against it as well. If this bill were to pass, the crypto market would be taking a big hit that could cost investors serious money.
At a press conference, justice minister Park Sang-ki said, "There are great concerns regarding virtual currencies and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges". The announcement was reportedly made after a discussion with South Korea’s finance ministry and regulator’s.
For the ban to officially pass, a majority vote consisting of 297 National Assembly members would be required. This process can potentially take several months if not upwards of years to complete.
While cryptocurrency trading is active within the nation, it still has a degree of taboo nature attached to it. Some compare it to gambling which could attribute to South Korea’s substantially higher exchange prices.
The local exchange Bithumb had Bitcoin priced at $17,169.65 per token while CoinDesk was 31% lower.
This premium also caused CoinMarketCap to exclude exchanges such as Krobit, Bithumb, and Coinone from its price calculations. They tweeted saying the reasons were "extreme divergence in prices from the rest of the world" and "limited arbitrage opportunity."
This morning we excluded some Korean exchanges in price calculations due to the extreme divergence in prices from the rest of the world and limited arbitrage opportunity. We are working on better tools to provide users with the averages that are most relevant to them.
— CoinMarketCap (@CoinMarketCap) January 8, 2018
Many saw this ban proposal coming with the South Korean Financial Services Commission prohibiting exchanges from issuing new accounts last month.
The commission stated they would shut down exchanges or take further action if they did not comply.
On top of this, the government stated that it would intervene to limit funds being put into cryptocurrency. Companies involved with cryptocurrency in South Korea such as Omnitel, Vidente, Digital Optics, and KPM Tech all experienced drops in shares with this news.
As of now, this ban is not yet in place and could take a long period of time to be official. Investors should now be more cautious trading against the South Korean won with the current political climate.
