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South Korea is Not Banning Bitcoin but FUD Drives Price Down

Last Updated March 4, 2021 5:03 PM
Joseph Young
Last Updated March 4, 2021 5:03 PM

Earlier today, unconfirmed and false rumors that the South Korean government will ban bitcoin and cryptocurrency exchanges led the price of bitcoin down.

Bitcoin price falls below $14,000

South Korea is Not Banning Bitcoin

Reuters published a four-sentence article on December 27, claiming that the South Korean government will enforce new regulations and close down cryptocurrency exchanges. However, merely hours later, Reuters corrected the story by reporting that the South Korean government will close anonymous cryptocurrency exchange accounts, which was the plan since December 13, as CCN.com reported on many occasions.

Consequently, Reuters was criticized by many experts and analysts including IamNomad, leading Forbes to publish its previous article dated December 15, reaffirming that the South Korean government is in process of regulating the market to drive adoption and further stabilize the cryptocurrency industry.

CCN.com also reported today, on December 28, that the South Korean government will disable anonymous accounts on cryptocurrency exchanges. In an emergency meeting held on December 13, the South Korean government and its cryptocurrency task force formed by the South Korean Ministry of Strategy and Finance, Financial Services Commission, Ministry of Justice, Fair Trade Commission, and Financial Supervisory Commission revealed that foreigners and underaged investors will be prohibited from trading bitcoin.

The foreign investor ban was enforced after a group of Chinese traders were caught laundering millions of dollars and taking advantage of the South Korean cryptocurrency exchange market’s premium rates by arbitraging bitcoin. Because the price of bitcoin in the South Korean market is around 20 percent higher than that of the global average price, the traders brought bitcoin from China, possibly from local miners, sold them in South Korea, and sent Chinese yuan back to their homeland.

The South Korean government introduced regulations to prevent such activities from occuring in the future, and to protect underaged investors from large risks involved in cryptocurrency trading. Previously, South Korean Prime Minister Lee Nak-yeon expressed his concerns over bitcoin mania in South Korea, as middle school to college students started to day-trade bitcoin on a daily basis.

Local Exchanges Want Regulations

Local exchanges like Bithumb, the world’s second largest cryptocurrency market based in Seoul, South Korea, said that they welcome regulations because it will allow the local bitcoin market to stabilize, mature, and grow at a faster rate. More to that, an increasing number of investors in the South Korean market are falling victim to cryptocurrency-related ponzi schemes.

As such, it is beneficial for the government to regulate the space so that investors trade bitcoin and other cryptocurrencies directly on exchanges, not through third party service providers and intermediaries, which leave investors vulnerable to scams and ponzi schemes.

”A right set of regulations will rather nurture the (virtual currency) market, and we would welcome that,” said Bithumb. 

The false news around the South Korean government’s optimistic approach to regulating the local bitcoin market led the price of bitcoin to decline. In addition to the major correction of the entire cryptocurrency market which brought bitcoin down from $16,000 to $15,000, the price of bitcoin has declined to $14,000.