Seoul Mulling Ban on Bitcoin Trading


South Korea today banned its financial institutions from dealing in virtual currencies such as Bitcoin, as the cryptocurrency soars in a bubble fuelled by retail speculators, many of them from the country.

Cryptocurrencies, such as bitcoin and ethereum, have rapidly gained popularity in recent years.

The Korea Communications Commission (KCC) made a decision to impose fines totaling 60 million won (US$54,970) on BTC Korea.Com, an operator of Bithumb, the largest bitcoin and ethereum digital currency exchange in South Korea, for its alleged negligence in the protection of its users' information.

Furthermore, officials are proposing a ban on all cryptocurrency transactions unless they take place through exchanges that meet certain conditions: customers' funds are to be kept separately, exchanges must explain investment risks, users' real names have to be confirmed, anti-money laundering and asset protection systems need to be in place, and transaction details must be disclosed to the public.

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Seoul-based Bithumb, the world's busiest virtual currency exchange, has said it would comply with the rules. The Japanese government in April granted cryptocurrencies legal status as a means of settlement and in September officially recognised 11 digital currencies exchanges. "We are looking at how to protect investors, and at the same time we are reviewing (measures) to regulate (the digital currency)", he said.

Bitcoin-related shares slumped in early trade.

Despite a boom in the trading of digital currencies, such exchanges are largely unregulated as they are not recognized as financial products. Bitcoin futures maturing in January on the Cboe Global Markets' Cboe Futures Exchange were $17,700, having opened at $18,010.

"BlackRock's view is that this isn't a financial asset that we would trade in terms of equities or fixed income instruments", said Belinda Boa, head of active investments for Asia Pacific, BlackRock.