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Bitcoin dips below $14,000 as South Korea bans anonymous trading

Hong Nam-ki, South Korea's minister for government policy coordination, announces the introduction of a real-name transaction system for cryptocurrency trading.
(Yonhap News Agency)
Bloomberg

Bitcoin resumed its slide Thursday, dipping below $14,000 as the cryptocurrency’s dizzying drop from a record set 10 days ago intensified.

The latest blow came from South Korea, where the government said it will require people to use their real names in cryptocurrency trading and was eyeing other options for stamping out a frenzy of speculation, including a potential shutdown of at least some exchanges.

Bitcoin — the world’s biggest cryptocurrency — fell as much as 9% to $13,828 overnight, erasing modest gains after the South Korea news, composite Bloomberg pricing shows. It fluctuated near $14,000 as of 6:20 a.m. Pacific Time. That was down 28% from the record $19,511 it reached Dec. 18.

Bitcoin’s plunge comes after futures contracts started trading on CME Group’s exchange, giving investors new ways to bet on the digital coin’s price moves. The news from South Korea unnerved traders because that country has been ground zero for a global surge in interest in bitcoin as the currency’s rally this year reached 1,600%.

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Although there’s no indication that Asia’s No. 4 economy will shut exchanges that have accounted by some measures for more than a fifth of global trading, the news is a warning as regulators express concerns about private digital currencies. South Korea 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.

Bitcoin was trading at an approximately 30% premium over prevailing international rates Thursday in Seoul, according to price data from local exchanges. That’s a continuing sign of the country’s obsession and of the difficulty in arbitraging between markets.

“Cryptocurrency speculation has been irrationally overheated in Korea,” the government said in the statement, which came 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.”

Singapore’s monetary authority warned last week that digital currency buyers should be aware they could lose all their money. Counterparts in other countries also have warned about speculative mania surrounding bitcoin, which has surged more than 1,300% this year.

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“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.”

Cho and Lam write for Bloomberg.


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