Cryptocurrency markets are in turmoil today with Bitcoin down 14% at time of writing. Most altcoins are down, with some falling between 20 and 30%. The sell-off seems to have been triggered by misreporting over the legality of cryptocurrencies in Asia.
The resulting “confusion” over the official status of cryptocurrencies in South Korea is driving much of the bearish sentiment. South Korea is one of the world’s hubs for cryptocurrency trading and enthusiasm there has driven many of the spectacular price increases of recent months.
Last week the South Korean Minister for Justice unilaterally announced plans to ban cryptocurrencies, without consulting the other ministries which make up the group responsible for crypto regulation. The president’s office quickly moved to reassure the public that no ban was in fact imminent, but by then the news had been widely reported in the mainstream media.
Today Finance Minister Kim Dong-yeon explained that the government needed to “regulate cryptocurrency investment as it is a largely speculative investment“. As to how that regulation might take place he mentioned that they were, “tinkering with the option of levying taxes” and that one of the options was the “shutdown of virtual currency exchanges”, though that would need more discussion among government departments.
Still, the refusal to rule out an exchange ban was seized on by the media who painted a picture of an imminent ban, and startled investors have been selling ever since.
Over in China
Confusion over the South Korean situation comes against a backdrop of the Chinese government hardening its stance against cryptocurrencies. After banning ICOs and exchanges in September 2017, authorities have recently issued warnings against Initial Miner Offerings (IMOs) as “ICOs in disguise”. They are also planning legislation to ban centralised trading of all virtual currencies, making illegal any website or mobile app which makes markets, or clears or settles trades.
The Chinese government is also moving against cryptocurrency mining An official from the People’s Bank of China has proposed the country easing out of the space by having local authorities slowly withdraw electrical power allowances to mining operations.
The European Picture
The Minister of the Economy for France, Bruno Le Maire, yesterday announced a taskforce to dampen speculative activity in cryptocurrencies and advise on regulation. At the same time Bundesbank board member Joachim Wuermeling called for an international approach as the only effective way to enact cryptocurrency regulation.
Regulators worldwide have spoken a lot about the dangers of people losing money by investing in cryptocurrencies. It now appears that people are losing money on their cryptocurrency investments… because of regulators.