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Bitcoin drops as South Korea says exchange closures are possible
[SEOUL] 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 cryptocurrencies as prices surged this year, prompting the nation's prime minister to worry over the impact on Korean youth. While there's no immediate indication Asia's No 4 economy will shutter exchanges that have accounted by some measures for more than fifth of global trading, the news poses a warning as regulators the world over express concerns about private digital currencies.
Bitcoin fell as much as 9 per cent to as low as US$13,828 in Asia trading, erasing modest gains after the South Korean release, composite Bloomberg pricing shows. It's now down about 28 per cent from its record high reached last week.
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 per cent premium over prevailing international rates on Thursday in Seoul - 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 cryptocurrency 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 per cent 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."