South Korea stirs digital coin fears

Bitcoin slumped to its lowest level since Christmas Day as South Korea’s justice minister reiterated his proposal to ban local cryptocurrency exchanges, fueling concern that a crackdown will erode demand for digital coins in one of the world’s biggest markets.

The minister’s comments to reporters Thursday were later downplayed by a spokesman for President Moon Jae-in, who said that the proposal is one among several and that nothing has been finalized. South Korea’s government unveiled multiple options for cryptocurrency exchange regulation Dec. 28, including allowing trading to continue under tighter supervision.

Governments around the world are increasing scrutiny of cryptocurrencies as soaring prices attract everyone from mom-and-pop investors to Wall Street banks. South Korea emerged as something of a ground zero for the speculative mania, playing host to several of the world’s most active exchanges. Bitcoin prices in the country are persistently higher than those in the U.S.

The boom has alarmed authorities. The country’s prime minister has said that cryptocurrencies might corrupt youths, and the government warned that it would conduct on-site investigations of exchanges. The Finance Ministry is studying a potential cryptocurrency tax.

“For the last few months, the Korean government has been making it very clear they want to bring this speculative activity under control,” said Thomas Glucksmann, Hong Kong-based head of APAC business development with cryptocurrency exchange Gatecoin Ltd. “This isn’t really too much of a surprise.”

Bitcoin dropped as much as 12% to $12,801 before paring the loss to about 5% at 6:10 a.m. Pacific time, according to data compiled by Bloomberg. Ripple trimmed its 21% tumble to a 14% drop. Ethereum slumped 5%.