Bitcoin prices tumble as South Korea upholds threat to ban cryptocurrency over regulation and tax

Prices of bitcoin and other digital currencies have skidded after South Korea's top financial policymaker said Tuesday (16 January) that a crackdown on trading of cryptocurrencies was still possible.

Finance minister Kim Dong-yeon said in an interview with local radio station TBS that banning trading in digital currencies was "a live option." He said the decision was subject to a thorough government review.

"There are no disagreements over regulating speculation," such as using real-name accounts and levying taxes on cryptocurrency trading, Kim said. Shutting down digital currency exchanges is "a live option but government ministries need to very seriously review it," he said.

Bitcoin was trading at $12,615.60, down 7.1% from the day before as of 8:03 am (GMT), according to Coindesk.

The price of ethereum, another digital currency, had slipped 7.8% to $1,190.45 as of 8:04 am (GMT).

South Korean officials' remarks have swayed the global markets for bitcoin and other cryptocurrencies in the past few weeks.

The country has seen a huge bitcoin craze, with young and old betting on the cryptocurrency to build wealth. The high demand from South Korean investors has created what investors call a "kimchi premium," the extra price the South Koreans have to pay to buy digital currencies, sold in South Korea at higher than the average global prices.

Last week, the justice minister's remark that the country will ban bitcoin and other digital currencies triggered big sell-offs and a public outcry.

The presidential office then said that no final decision had been made.

An online petition on the presidential office's website has drawn more than 210,000 requests from people asking the government not to ban trading in digital currencies.

"We the citizens were able to have a happy dream that we had never had in South Korea thanks to cryptocurrency," the petition reads. "You may think you are protecting the public but we citizens think that the government is stealing our dream."

According to Bloomberg, China is also pondering a cryptocurrency crackdown. A report published Tuesday said online platforms and mobile apps based around trading are now under threat.

Back in South Korea, authorities recently raided a number of exchanges which had been accused of tax evasion. In the UK, politicians have indicated that increased regulation may be incoming.

"The market is correcting off the back of news that China is moving to crack down on trading," commented Iqbal Gandham, managing director at cryptocurrency retailer eToro.

"Chinese investors are likely spooked having heard the news and the market is on edge as a result. But we don't expect to see a major sell-off," he added.

"Bitcoin in particular has gone through this cycle before, eventually shrugging off regulatory clampdowns from governments and central banks after initially falling in price."