The governments of China and South Korea have moved to clamp down on cryptocurrency markets. The South Korean government said on Thursday that it is planning to ban cryptocurrency trading, while Chinese regulators are reportedly going to ban mining of bitcoins.
Bitcoin prices plunged in response to the news from South Korea, the third largest market for cryptocurrencies. The price of Bitcoin dropped 14 per cent to a low of $12,800 on the Luxembourg-based Bitstamp exchange.
"Cryptocurrency trading becomes akin [to] speculation and gambling... it is a risky trading form which can inflict serious financial damage on citizens," said Park Sang-ki, South Korea's justice minister.
A bill to ban cryptocurrency trading, just like any other bill, would have to be passed by the country's 297-member National Assembly. The process could take months or even years.
Once enforced, the ban would practically end cryptocurrency trading in the East Asian country.
The frenzied increase in Bitcoin prices since January 2017 has resulted in enormous demand for the cryptocurrency in South Korea, with students and housewives becoming Bitcoin investors.
South Korea has more than a dozen cryptocurrency exchanges, according to the Korea Blockchain Industry Association.
The proposal to ban cryptocurrency trading has come after raids by the tax authorities at the country's major cryptocurrency exchanges such as Bithumb and Coinone.
Clampdown on Bitcoin Mining in China
China, meanwhile, is reportedly planning an “orderly exit” for bitcoin mining operations.
Bitcoin mining, or the process of creating new bitcoins, involves solving complex mathematical problems using powerful computers. The process consumes massive amounts of electricity – it is estimated that mining of bitcoin and other cryptocurrencies would account for 0.6 percent of the world’s electricity consumption in 2018.
China’s coal-rich regions where electricity is cheap had become a magnet for Bitcoin miners.
Many such mines are located in regions such as Yunnan, Inner Mongolia, Sichuan and Xinjiang.
Chinese authorities had banned initial coin offerings last year and asked local exchanges to stop virtual currency trading.
The clampdown on bitcoin mining is led by the People’s Bank of China (PBoC), the country’s central bank. A multi-agency task force led by PBoC has instructed provincial governments to “actively guide” companies to exit the cryptocurrency mining industry, said a Financial Times report. “It is not calling on regional authorities to shut down mining operations directly, but rather to squeeze them out by strictly enforcing policies on land use, electricity, tax collection and environmental regulation,” said the report.