Since the early morning hours of today’s Thursday, news has been circulating that the South Korean government wants to start drafting a law to ban the trade of Bitcoin and other crypto currencies. We have taken a closer look at these reports and are now classifying them.
South Korea forbids Bitcoin – so or similarly it sounded today from many different sides
The reason for this was the statement of the South Korean Minister of Justice Park Sang-ki, that he wants to issue a law that forbids the trade with crypto currencies in the country. Since the South Korean government has strong reservations about digital currencies, his ministry is already preparing such a law. This is being done in close coordination with the Ministry of Finance and the Korean regulatory authority.
At first, these events are reminiscent of the situation in China in September last year. While the government of the People’s Republic had initially banned Initial Coin Offerings in cooperation with the Chinese central bank PBoC, it followed up a week later and also announced the closure of the crypto exchanges located in China. South Korea quickly adopted the Chinese ICO ban, and now the East Asian state also seems to be thinking about the second part of the „China bomb“.
Then as now, the market reacted sensitively to the news and turned red almost all the time
However, the fall today is by far not as extreme as it was in September. If prices then fell by 30-50% in rows, causing the market to lose a third of its capital, the current case is very moderate and in most cases in the single-digit minus range. Moreover, today’s market capitalisation cannot be compared with that of the past, as much has happened in the crypto market since September.
Nevertheless, South Korea remains an important market for crypto currencies, it is estimated that up to 20 % of global crypto trade is conducted in Korea, and global exchanges with Bithumb or Coinone operate on the peninsula. The influence of the South Korean market was recently painfully experienced by Ripple, whose share price collapsed dramatically after Coinmarketcap took the market volume traded in Korea off the calculation.
There are, however, increasing signs that the announced regulation may turn out to be less bad than it is now being inflated by the media. Not only are prices currently recovering, but the question also arises as to what the general announcement of a Minister of Justice actually means in concrete terms. Unlike China, South Korea is not an autocratically governed one-party state, but has a parliament that passes laws. In addition, there does not yet seem to be an exact definition of the law, which is why it is not yet known what a possible restriction on trade in crypto currencies should look like at all. The role of the South Korean Ministry of Finance also seems unclear – local media report that representatives of the Ministry of Finance would not support the Minister of Justice’s proposals. Already in December the option of a crypto ban was on the table – but it was decided against.
And finally, the comparison with China doesn’t seem that scary either: after the ban on crypto exchanges in the People’s Republic, the largest Exchanges settled in the neighbouring Hong Kong Special Administrative Zone, from where trade in and with crypto currencies could continue as usual. Recently even a court judgement in China provided for attention, which granted the humans in China the right to trade crypto currencies. Reason enough, therefore, to look forward calmly to the current reports from South Korea.