South Korea continues to roil the cryptocurrency markets.
On Thursday, after Justice Minister Park Sang-Ki announced that the South Korean government was considering making cryptocurrency trading illegal, the broad crypto market suffered another steep sell off. Bitcoin and Ethereum both fell by 14% on the news.
“There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” said Park during a news conference on Thursday, according to Reuters.
The declaration may have been a bit premature. Officials at the Blue House — South Korea’s version of the White House — clarified later that there would be no trading ban just yet.
However, the government continues to tighten rules and oversight to quell the cryptocurrency craze.
While South Korea ranks 27th globally by population and 11th by gross domestic product, it is the world’s third largest crypto trading market in the world, behind just Japan and the U.S.
South Koreans account for 20% of bitcoin trading. Plus, it has more than a dozen exchanges in operation. A South Korean crackdown would certainly merit a pricing backlash.
Another sign of the frenzy in South Korea is the so-called kimchi premium, which refers to the fact that most of the major cryptocurrencies trade at steep premiums on Korean exchanges — often 20% to 40% higher — than on other exchanges around the world.
For instance, at midday on Friday, Bitcoin was trading at $18,200 on Bithumb in Korea, which was roughly 33% higher than the $13,700 bitcoin was going for in the U.S. at the same time, according to bitstamp.net.