World Economy

Bitcoin Prices Plunge as Crackdown Continues

South Korea’s presidential office said a ban on the country’s virtual coin exchanges has not yet been finalized, though it was one of the measures being considered
There have been reports that China’s government is discouraging bitcoin mining  in the country, home to the majority of that process.There have been reports that China’s government is discouraging bitcoin mining  in the country, home to the majority of that process.

Bitcoin slumped to its lowest level since Christmas day as South Korea’s justice minister reiterated his proposal to ban local cryptocurrency exchanges, fuelling concern a state crackdown will erode demand for digital coins in one of the world’s biggest markets.

Park Sang-ki said the government was preparing a bill to ban trading of the virtual currency on domestic exchanges, news outlets reported.

"There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges," Park told a news conference, according to Reuters.

But, after bitcoin collapsed, a few hours later South Korea’s presidential office said a ban on the country's virtual coin exchanges had not yet been finalized, though it was one of the measures being considered.

Korea’s government unveiled multiple options for cryptocurrency exchange regulation on Dec. 28, including allowing trading to continue under tighter supervision.

In South Korea, police and tax authorities raided local exchanges on alleged tax evasion. Government bodies around the world have been clamping down on bitcoin in some form. Last weekend, Bloomberg reported that Chinese authorities had outlined proposals to discourage bitcoin mining. Bitcoin miners are prevalent in China due to low operational costs.

Meanwhile, stateside, a few companies withdrew their applications for bitcoin ETFs, according to Coindesk, with some companies saying that the SEC had been “resistant” to their efforts. Companies that withdrew their applications include Exchange Listed Funds Trust, ProShares and Direxion.

The price of bitcoin was down more than 5% at $14,106.27, according to Coindesk.

The boom has alarmed Korean authorities. The country’s prime minister has said that cryptocurrencies might corrupt the nation’s youth, while the government warned in December that it would be conducting on-site investigations of exchanges. The finance ministry is studying a cryptocurrency tax.

“For the last few months the Korean government has been making it very clear they want to bring this speculative activity under control,” said Thomas Glucksmann, Hong Kong-based head of APAC business development with cryptocurrency exchange Gatecoin Ltd. “This isn’t really too much of a surprise.”

One of Korea’s biggest digital currency venues, Bithumb, said on Thursday that it met briefly with tax officials this week. The exchange disputed a Reuters report that its offices had been raided by tax and police agents. When contacted by Bloomberg, Korea’s tax authority said it doesn’t comment on investigations due to privacy laws.

A range of negative comments from investors and governments have undercut the market this week. Ripple, for example, is down for a fourth successive day, something it hasn’t done since October. The market was “reeling” on Thursday over comments by Warren Buffett, eToro Senior Market Analyst Mati Greenspan said in a note Friday. The legendary investor said crypto gains will be fleeting.

China Discouraging Mining

There have also been reports that China’s government is discouraging mining in the country, home to the majority of that process.

 “Some interpreted these announcements to mean China will completely shut down mining operations,” said Bloomberg New Energy Finance China analyst Sophie Lu said. “Others feel that regulators are only tightening enforcement” on a process that in any event can move to other countries without threatening Bitcoin’s future.

At least a dozen Chinese listed companies have issued statements this week playing down links to blockchain technology amid signs regulators are trying to limit the kind of speculative surges seen in other markets.

Hangzhou Sunyard System Engineering Co. said Thursday it’s not involved in blockchain platforms, despite owning a stake in a blockchain company. Shenzhen Forms Syntron Information Co. said Wednesday a blockchain project it’s undertaking has “very little contribution” to its earnings and there’s “great uncertainty” on its future impact. Both companies said exchange operators had asked them to remind investors of risks.

At the same time, buying interest seems to swell unabated. The world’s biggest cryptocurrency exchange, Hong Kong-based, said it’s adding “a couple of million” registered users every week, with 240,000 people signing up in just an hour on Wednesday. And Russia’s Finance Ministry wants to allow trading cryptocurrencies on “official” exchanges, but Bank of Russia is currently against any trading, Deputy Finance Minister Alexey Moiseev said Thursday.

Coinone, another exchange mentioned in the Reuters report, didn’t reply to requests for comment. An unidentified spokesman told the Financial Times: “They asked for some data such as cryptocurrency trading volume, our exchange’s sales and whether we are paying corporate tax well.”

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