Crackdown on bitcoin
South Korea will require people who trade bitcoin and other virtual currencies to do so under their real names, the country’s government said Thursday, as part of efforts to curb speculation.
Bitcoin, the bestknown virtual currency, has been on a gravitydefying bull run over the past few months. The price of a bitcoin started the year around $1,000 and topped $19,000 this month, causing ordinary savers around the world to get in on what remains a largely unregulated — and highly volatile — investment.
Nowhere, though, has the frenzy over virtual currencies been as fevered, or as sudden, as in South Korea.
Until recently, markets for bitcoin and its competitors barely existed in the country. But a spurt of interest has swept up ordinary people from students to retirees. Trading has become so popular that some South Korean exchanges have set up physical storefronts where the uninitiated can learn more and buy in.
Requiring that trading take place using real names brings virtual currencies like bitcoin more in line with other financial products in South Korea. Although bitcoin has shed some of its associations with payment for illegal activity, the real-name policy set out Thursday could also make it easier for the South Korean government to track transactions and to tax capital gains from virtual currency investments. The price of bitcoin tumbled after the announcement.
“Cryptocurrency speculation has been irrationally overheated in Korea,” the government said, adding that officials will discuss further potential moves to stem speculative trading, such as shutting down some virtual currency exchanges. “The government can’t let this abnormal situation of speculation go on any longer.”
Kim Jin-hwa, who heads an industry association for businesses working with virtual currencies and other applications of blockchain technology in South Korea, said most of the country’s virtual currency exchanges could already verify customers’ identities via their cell phones. The exchanges, Kim said, had also worked with banks to develop new measures for ensuring transparency.
The government is more interested in sending a warning to investors about the potentially overheated market, said S.G. Lee, chairman of the Korea Fintech Industry Association.
Thursday’s slump in bitcoin prices — it was close to $14,000 as of mid-afternoon Thursday — also took down stocks with ties to cryptocurrencies.
Pareteum dropped 25 percent, while Digital Power and LongFin each slipped more than 6 percent. Overstock.com, On Track Innovations and Riot Blockchain also traded lower Thursday, in relatively light volume during a holiday-shortened week.