Bitcoin resumed its tumble on Thursday after South Korea said it was eyeing options including a potential shutdown of at least some cryptocurrency exchanges to stamp out a frenzy of speculation.
South Korea has been ground zero for a global surge in interest in bitcoin and other digital currencies as prices surged this year, prompting the nation’s prime minister to worry over the impact on Korean youth. While there’s no indication Asia’s No. 4 economy will shutter exchanges that have accounted by some measures for more than a fifth of global trading, the news is a warning as regulators express concerns about private digital currencies.
Bitcoin fell as much as 9 percent to as low as $13,828 in Asia trading, erasing modest gains after the South Korean release, composite Bloomberg pricing shows. The cryptocurrency had retraced some of its losses by 12:09 p.m. in London, trading down 7.4 percent to $14,059. That puts the drop from a record high reached last week at about 28 percent.
South Korea will require real-name cryptocurrency transactions and impose a ban on the offering of virtual accounts by banks to crypto-exchanges, according to a statement from the Office for Government Policy Coordination. Policy makers will review measures including the closure of crypto-exchanges suggested by the Ministry of Justice and take proper measures swiftly and firmly while monitoring the trend of the speculation.
Bitcoin was trading at about a 30 percent premium over prevailing international rates on Thursday in Seoul, according to price data from local exchanges, a continuing sign of the country’s obsession, and the difficulty in arbitraging between markets.
“Cryptocurrency speculation has been irrationally overheated in Korea,” the government said in the statement, which comes little more than a week after the bankruptcy filing of one South Korean exchange. “The government can’t leave the abnormal situation of speculation any longer.”
Singapore’s monetary authority warned last week that digital currency buyers should be aware they could lose all their money, joining counterparts who’ve warned about speculative mania surrounding bitcoin, which has surged more than 1,300 percent this year.
“Regulators are getting so concerned that this is primarily and predominantly a retail phenomenon,” said Stephen Innes, head of trading for Asia Pacific at Oanda. “Regulators not only in Asia but globally are going to start addressing this fact because I don’t think they’ve actually come to terms with what the absolute downside of a complete drop in crypto means for the economy.”