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Abu Dhabi, UAESaturday 22 September 2018

South Korea mulls closing down virtual currency exchanges

Official says the government could shut down exchanges that violate the law

Regulators around the world are still debating how to address risks posed by cryptocurrencies such as bitcoin, the world's most popular virtual currency. Ahn Young-joon/AP
Regulators around the world are still debating how to address risks posed by cryptocurrencies such as bitcoin, the world's most popular virtual currency. Ahn Young-joon/AP

South Korean policymakers joined the global chorus of virtual-coin critics on Thursday, saying Seoul is considering shutting down domestic virtual currency exchanges as the new breed of market exposes users to speculative frenzy and crime.

The country's tough stance comes as policymakers from the United States to Germany struggle to come up with stricter regulation against money laundering and other crimes.

Responding to questions in parliament, South Korea's chief of the Financial Services Commission said: "(The government) is considering both shutting down all local virtual currency exchanges or just the ones who have been violating the law."

Separately, Bank of Korea Governor Lee Ju-yeol told a news conference that "cryptocurrency is not a legal currency and is not being used as such as of now."

Regulators around the world are still debating how to address risks posed by cryptocurrencies, as bitcoin, the world's most popular virtual currency, soared more than 1,700 per cent last year.

Prices have plummeted since South Korea announced last week it may ban domestic cryptocurrency exchanges. On Wednesday, bitcoin slid 18 per cent.

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According to Bithumb, South Korea's second-largest virtual currency exchange, the nation's bitcoin trading price stood at 15,697,000 won (US$14,690.69) as of 0314 GMT on Thursday.

On the Luxembourg-based Bitstamp exchange, bitcoin was traded at $11,750.

Hong Nam-ki, minister of the office for government policy co-ordination, said that opinions on cryptocurrency trading are sharply divided within the government, but vowed to make a decision on regulations during Thursday's parliamentary session.

South Korea's justice minister said last week the ministry was preparing a bill to ban cryptocurrency trading, which sent bitcoin prices sharply lower and threw the market into turmoil.

The shift toward tighter regulation sparked strong reaction from many South Koreans, thousands of whom signed a petition on the website of the presidential Blue House to stop a ban on cryptocurrency trading.

On Thursday, the BOK governor said the central bank had begun looking into the market's impact on the economy.

"We have started looking at virtual currency from a long-term standpoint, as central banks could start issuing digital currencies in the future. This sort of research has begun at the Bank of International Settlements and we are part of that research."

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