PYMNTS-MonitorEdge-May-2024

Bitcoin Tumbles As South Korea Cracks Down

The bouncing ball that is the price of bitcoin took a downward turn this week as South Korean regulators are eying options that would shutdown many of the nation’s very active cryptocurrency exchanges.  South Korean interest has been among the engines driving the price of bitcoin toward record highs of late, which has in turn pushed the nation’s prime minister into concerns about the nation’s youth and what the bitcoin bubble may do to their financial future.

While there is no official word that the 4th largest economy in Asia will be moving to officially shutter the nation’s exchanges — a devestating blow for bitcoin, given that around 20 percent of all global bitcoin trades are based in South Korea — the news came as a sobering reality check for crypto enthusiasts world wide that regulators are becoming less tolerant of digital currencies and the risks they bring in their wake.

The price of bitcoin was sensitive to the new round of regulatory skepticism — it dropped 9 percent to $13,828 in Asian trading. The tumble was sufficient to undo modest gains bitcoin had made over the last two days, though bitcoin remains about 27 percent below its ~$20K high shortly before Christmas.

South Korean exchanges will be limiting some aspects of bitcoin — they 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.

“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.”

The move comes after last week’s warning from Singapore’s monetary authority that digital currency buyers should be aware they could lose all their money.

“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.”

And that skeptical feeling is, in fact, global — and present at all levels of government. Massachusetts Secretary of the Commonwealth — and head securities regulator — William Galvin noted that bitcoin “doesn’t pass the smell test,” in a conversation with CNBC.

“There is no product here. This is entirely speculation. That’s already been proven by the high gyrations of the value,” Galvin said. “It’s also subject to manipulation, because no one can explain it and no one can control it.”

Massachusetts issued a warning to consumers that bitcoin could likely present a dangerous threat to investors earlier this month.

PYMNTS-MonitorEdge-May-2024