Bitcoin price nosedives after South Korea announces cryptocurrency crackdown

The South Korean government has become the latest to try and control the digital currency
Bitcoin prices slumped dramatically today as the South Korean government announced new regulations to try and halt the wild speculation that is engulfing the cryptocurrency.

South Korea is following in the footsteps of China and Vietnam; two countries which have already imposed measures to try and control Bitcoin.

The result was a fall in the value of bitcoin from around $16,400 (£12,204) earlier in the week to $13,500 (£10,000) today.

“The government had warned several times that virtual coins cannot play a role as actual currency and could result in high losses due to excessive volatility,” the South Korean government said in a statement, according to Reuters.

“We cannot leave the abnormal situation of speculation any longer.”
South Korea is banning the opening of anonymous cryptocurrency accounts and will introduce legislation that lets regulators close down virtual coin exchanges if necessary.

The government said this was a measure that was recommended by the justice ministry, according to Reuters.

According to the Financial Times, bitcoin has become incredibly popular in South Korea, leading to inflated prices around trading.

“South Korean traders are paying about 30 per cent over international rates for bitcoin, reflecting the popularity of the asset in the country and the difficulty in arbitraging among markets,” the site reported .
Last month, Vietnam introduced a ban on bitcoin and other virtual cryptocurrencies, echoing a similar move made by China in October.

The country’s state bank issued a formal statement prohibiting the use of virtual currencies to pay for goods and services. The punishment for offering and accepting payments in bitcoin can run to over £6,000.

The bank doesn’t expressly say why it is banning the use of bitcoin but rather highlights regular forms of payment: cheques, credit cards, etc as acceptable.

“Bitcoin virtual currency and other similar is not lawful means of payment in Vietnam; The issuance, supply, use of bitcoin and other similar virtual currency as a means of payment is prohibited in Vietnam,” explained the government-run bank.

Why are banks and governments scared of Bitcoin?
Bitcoin – and other decentralised cryptocurrencies – allow people to trade directly with each other, cutting out the need for a middleman which, in traditional commerce, is a bank.




Banks generally charge fees for doing anything with money, even just holding on to it. That’s because the banks have created a level of trust that transactions pass smoothly and everything is recorded and accounted for correctly.

But as the financial crisis of 2008 proved, banks are not above abusing trust to line their own pockets.
That’s what led to the development of cryptocurrencies like Bitcoin in 2009.

The key to its success is something called the blockchain. The blockchain is a means of solving the double-spending problem: which is that because the currency is digital it is open to being copied and spent more than once – something banks stop with physical currency.
However, the blockchain acts as a digital ledger, whereby every single transaction (called a block) is securely linked together using cryptography and encryption. It’s verifiable, available to everyone who owns Bitcoin and is immune to fraud and hacking – unlike centralised banks.

It enables one digital wallet (that can be stored on a phone) to directly connect with another securely and process a transaction.

As such, it removes the need for any kind of traditional bank or regulator.

Source:www.mirror.co.uk