Bitcoin prices have been taking a hit in the last two weeks after following an announcement by South Korea to launch a fresh shutdown on cryptocurrency exchanges. The South Asian nation is reportedly set to start implementing new laws banning cryptocurrency trading on anonymous accounts on or around January 20, 2017.
The proposal basically strengthens know-your-customer regulations that are already in existence for banks and exchanges and will require users of cryptocurrency exchanges to link a bank account with personal/identifying information to be able to withdraw or deposit funds.
Other rules include bolstering anti-money laundering regulations, as well as a prohibition on issuing new unidentified virtual accounts. Seoul’s proposals might even go as far as closing down cryptocurrency exchanges in the country.
The new rules were announced last week by the country’s Government Policy Coordination minister, Mr. Hong Nam-ki. He told local news networks at the time that the administration would not just sit and watch the speculation in cryptocurrencies go further. He added that the government would even keep a tight rein on cryptocurrency advertising.
South Korea’s Financial Supervisory Service and Financial Intelligence Unit will manage the rollout of the new laws, including by scrutinizing banks and exchanges to make sure they are abiding by the regulations.
Last week, Choe Heung-Sik who is the governor of Financial Supervisory Service said the bitcoin is just a bubble waiting to burst. Heung-Sik added that if South Korea was to launch its own official digital currency exchange, the decision would need to be reviewed very carefully.
Last week, bitcoin tumbled after the South Asian nation announced more actions to control bitcoin activities, including a possibility to crackdown exchanges, amidst unstable movement in the third-biggest cryptocurrency market in the world.
The price of the cryptocurrency fell more than 9 percent on Friday as traders following the announcement of the new measures, shrinking the value of the cryptocurrency to below $14K by late afternoon in NY. Nonetheless, it has since managed to recover some losses and is currently trading around $14,400.
Traders in South Korean are paying about 30% over global rates for bitcoin, showcasing the how popular the asset has become in the country and the challenge in arbitraging amongst markets. The digital currency is trading at $14,374 (Won15.27) on Bithumb, which is one of the busiest cryptocurrency exchanges in the world.
South Korea traders choose to use bitcoin exchanges that are in their country instead of those of the United States because they would have to have a bank account in America to purchase the digital currency in that market, which is obviously a cumbersome requirement.