In many instances, trends that occur in Asian nations like Japan and South Korea have been harbingers for what is to come in the West. For better, or worse. The rapid adoption and near feverish demand for cryptocurrency in South Korea is a perfect example of this.
First, it was China that banned it’s domestic cryptocurrency exchanges. Now the South Korean government is out for blood and has threatened to make all of its domestic exchanges illegal under new legislation that is now pending.
As South Koreans represent a large portion of cryptocurrency buyers and investors, prices for most assets dropped across the board following the announcement.
Domestic Exchanges Facing Possible Ban
On January 11th, Justice Minister Park Sang-ki informed the public of a new bill targetted at illegalizing all cryptocurrency trading (at exchanges) in South Korea. The bill does not make the use, ownership, or person to person exchange of cryptocurrency illegal.
Speaking to the press, Justice Minister Park was quoted as saying: “There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges”
A likely culprit for this anti-cryptocurrency move is the rampant speculation and market activity seen in South Korea in the last few months. The multiple hacking attacks that were suspected to have a North Korean origin that targeted Youbit and caused them to file for bankruptcy may have also played a part.
Bithumb and Coinone Raided by Authorities
Two of South Korea’s largest surviving cryptocurrency exchanges, Bithumb and Coinone, were reportedly raided by “police and tax agencies…for alleged tax evasion” according to Reuters.
Referring specifically to the raids, the Reuters piece suggests a possible motive. Specifically, the finance ministry may be trying to find ways to tax this burgeoning financial market.
A representative of Coinone noted that the exchange was cooperating with the investigation.
No one knows for certain if the newly proposed bill will pass or not. It is entirely possible that the bill could fail to get enough support within the government. Let’s suppose for a moment that all domestic exchanges are banned in South Korea. What sort of impact would this cause on the crypto economy?
For this, we need to consider what happened when domestic Chinese exchanges were suddenly raided and shut down. A short period of price drops followed, before the market quickly recovered.
A likely outcome of this legislation passing would be a fair amount of South Korean hobby traders would lose interest in cryptocurrency. However, dedicated core users or holders will likely be unphased and will instead use exchanges based in other countries.
While we are seeing a small price drop now, it’s unlikely that this will have any long lasting effects on the crypto economy. If bitcoin and other assets were able to recover after all the repeat China scares last year, this small bump should be quite easy to get over.