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Crypto-Linked Stocks Sink With Bitcoin on South Korean Warning

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The rout in bitcoin is also taking down stocks with ties to cryptocurrencies.

Pareteum Corp. fell as much as 25 percent as of 10:16 a.m. in New York, while Digital Power Corp. and LongFin Corp. each slipped more than 6 percent after South Korea’s government said it wanted to clamp down on speculation, potentially by shutting down some exchanges. The warning sent bitcoin below $14,000, leaving it down 26 percent from last week’s record.

Overstock.com Inc., On Track Innovations Ltd., and  Riot Blockchain Inc. also traded lower Thursday, in relatively light volume during a holiday-shortened week.

The crypto space has been on a wild ride this month, with the digital token bitcoin soaring to record highs before a dramatic selloff last week. The assets rebounded earlier this week, before resuming their slide lower in a test for investor enthusiasm in the asset class.

More from Bloomberg.com: Bitcoin Tumbles Over Exchange-Closure Fears

Such volatility isn’t new for bitcoin or its proxies. The digital coin has seen many peaks and valleys over the course of its history. This year, it’s climbed 1,400 percent and once reached more than $19,500. Related assets have largely moved in tandem with the cryptocurrency. Shares of Riot Blockchain and Digital Power, while taking a hit today, are still up 627 percent and 450 percent this year, respectively.

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By Cynthia Kim and Dahee Kim

SEOUL (Reuters) - South Korea's government said on Thursday it plans to ban cryptocurrency trading, sending bitcoin prices plummeting and throwing the virtual coin market into turmoil as the nation's police and tax authorities raided local exchanges on alleged tax evasion.

The clampdown in South Korea, a crucial source of global demand for cryptocurrency, came as policymakers around the world struggled to regulate an asset whose value has skyrocketed over the last year.

Justice minister Park Sang-ki said the government was preparing a bill to ban trading of the virtual currency on domestic exchanges.

"There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges," Park told a news conference, according to the ministry's press office.

After the market's sharp reaction to the announcement, the nation's Presidential office hours later said a ban on the country's virtual coin exchanges had not yet been finalised while it was one of the measures being considered.

A press official at the justice ministry said the proposed ban on cryptocurrency trading was announced after "enough discussion" with other government agencies, including the nation's finance ministry and financial regulators.

Once a bill is drafted, legislation for an outright ban of virtual coin trading will require a majority vote of the total 297 members of the National Assembly, a process that could take months or even years.

The government's tough stance triggered a selloff of the cryptocurrency on both local and offshore exchanges.

The local price of bitcoin plunged as much as 21 percent in midday trade to 18.3 million won ($17,064.53) after the minister's comments. It still trades at around a 30 percent premium compared to other countries.

Bitcoin (BTC=BTSP) was down more than 10 percent on the Luxembourg-based Bitstamp at $13,199, after earlier dropping as low as $13,120, its weakest since Jan. 2.

South Korea's cryptocurrency-related shares were also hammered. Vidente <121800.KQ> and Omnitel <057680.KQ>, which are stakeholders of Bithumb, skidded by the daily trading limit of 30 percent each.

Once enforced, South Korea's ban "will make trading difficult here, but not impossible," said Mun Chong-hyun, chief analyst at EST Security.

"Keen traders, especially hackers, will find it tough to cash out their gains from virtual coin investments in Korea but they can go overseas, for example Japan," Mun said.

Park Nok-sun, a cryptocurrency analyst at NH Investment & Securities, said the herd behavior in South Korea's virtual coin market has raised concerns.

Indeed, bitcoin's (BTC=BTSP) 1,500 percent surge last year has stoked huge demand for cryptocurency in South Korea, drawing college students to housewives and sparking worries of a gambling addiction.

"Some officials are pushing for stronger and stronger regulations because they only see more (investors) jumping in, not out," Park said.

By Thursday afternoon, the Justice Ministry's announcement had prompted more than 55,000 South Koreans to join a petition asking the presidential Blue House to halt the crackdown on the virtual currency, making the Blue House website intermittently unavailable due to heavy traffic, the website showed.

 

REGULATORY CONUNDRUM

There are more than a dozen cryptocurrency exchanges in South Korea, according to Korea Blockchain Industry Association.

The proliferation of the virtual currency and the accompanying trading frenzy have raised eyebrows among regulators globally, though many central banks have refrained from supervising cryptocurrencies themselves.

The news of South Korea's proposed ban came as authorities tightened their grip on some cryptocurrency exchanges.

The nation's largest cryptocurrency exchanges such as Coinone and Bithumb were raided by police and tax agencies this week for alleged tax evasion. The raids follow moves by the finance ministry to identify ways to tax the market that has become as big as the nation's small-cap Kosdaq index in terms of daily trading volume.

Some investors appeared to have taken preemptive action.

"I have already cashed most of mine (virtual coins) as I was aware that something was coming up in a couple of days," said Eoh Kyung-hoon, a 23-year old investor.

 

Bitcoin sank on Monday after website CoinMarketCap removed prices from South Korean exchanges, because coins were trading at a premium of about 30 percent in Asia's fourth-largest economy. That created confusion and triggered a broad selloff among investors.

An official at Coinone told Reuters that a few officials from the National Tax Service raided the company's office this week. The official, who spoke on condition of anonymity, said that Coinone was cooperating with the investigation.

Bithumb, the second largest virtual currency operator in South Korea, was also raided by the tax authorities on Wednesday.

"We were asked by the tax officials to disclose paperwork," an official at Bithumb said, requesting anonymity due to the sensitivity of the issue.

The nation's tax office and police declined to confirm whether they raided the local exchanges.

South Korean financial authorities had previously said they are inspecting six local banks that offer virtual currency accounts to institutions, amid concerns the increasing use of such assets could lead to a surge in crime.

($1 = 1,069.9600 won)

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By Jemima Kelly

LONDON (Reuters) - Bitcoin tumbled 18 percent on Tuesday to a four-week trough close to $11,000, after reports that a ban on trading of cryptocurrencies in South Korea was still an option drove fears grew of a wider regulatory crackdown.

Bitcoin's slide triggered a massive selloff across the broader cryptocurrency market, with biggest rival Ethereum down 23 percent on the day, according to trade website Coinmarketcap, and the next-biggest, Ripple, plunging 33 percent.

South Korean news website Yonhap reported that Finance Minister Kim Dong-yeon had told a local radio station that the government would be coming up with a set of measures to clamp down on the "irrational" cryptocurrency investment craze.

South Korea had said on Monday that its plans to ban virtual coin exchanges had not yet been finalized, as government agencies were still in talks to decide how to regulate the market.

Bitcoin slid on the latest news, trading as low as $11,191.59 on the Luxembourg-based Bitstamp exchange, down 18 percent on the day, for a short period putting the digital currency on track for its biggest one-day fall in three years.

"It's mainly been regulatory issues which are haunting the cryptocurrency, with news around South Korea's further crackdown on trading the driver today," said Think Markets chief strategist Naeem Aslam, who holds what he described as "substantial" amounts of bitcoin, Ethereum and Ripple.

"But we maintain our stance. We do not think that the complete banning of cryptocurrencies is possible," he said.

Cryptocurrencies enjoyed a bumper year in 2017 as mainstream investors entered the market and as an explosion in so-called initial coin offerings (ICOs) - digital token-based fundraising rounds - drove demand for bitcoin and Ethereum, the second-biggest digital unit.

The latest tumble leaves bitcoin down more than 40 percent from the record high around $20,000 it hit in mid-December, wiping about $130 billion off its "market cap" - the unit price multiplied by the total number of bitcoins that have been released into the market.

The news from South Korea came as it emerged a senior Chinese central banker had said authorities should ban centralized trading of virtual currencies as well as individuals and businesses that provide related services, according to an internal memo from a government meeting seen by Reuters.

Bloomberg reported on Monday that Chinese authorities plan to block domestic access to Chinese and offshore cryptocurrency platforms that allow centralized trading.

"(It) seems like it's uncertainty spooking the markets,...with regulations unclear," said Charles Hayter, founder of data analysis website Cryptocompare. "(Traders) are taking profits on the increased risk scenarios going forward."

A director at Germany's central bank said on Monday that any attempt to regulate cryptocurrencies must be on a global scale as national or regional rules would be hard to enforce on a virtual, borderless community.

By 1000 GMT bitcoin was trading down 16 percent on the day at around $11,500 on Bitstamp.

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Cryptocurrency company BitConnect said it’s closing its lending and exchange platform after receiving cease and desist letters from Texas and North Carolina.

The move has helped spark a big selloff in the virtual currency linked to the company, BitConnect Coin, also known as BCC. It was recently down 97% to $6.09, according to CoinMarketCap.com data. BCC had traded as high as $322 on Tuesday.

U.K.-based BitConnect said on its website that the cease and desist letters from the two states “have become a hindrance for the legal continuation of the platform.”

BCC’s market capitalization had dived to about $50 million after nearing $3 billion in late December. The market cap is shown in the above chart’s blue line, while the green line represents BCC’s price in dollars.

BitConnect has been soliciting investors for cryptocurrency-based programs that the company claims will deliver annualized returns of 100% or more, said securities regulators for Texas in a news release.

BitConnect was not registered as a dealer or salesman of securities in North Carolina and had failed to disclose material facts when offering investments in the Tar Heel State, that state’s regulators said.

 

BitConnect also said “continuous bad press has made community members uneasy and created a lack of confidence.” In addition, several denial of service attacks on BitConnect ‘s platform “have created more panic inside the community,” the company said.

BCC’s dive follows a broad selloff Tuesday for bitcoin BTCUSD, -10.81%  , the world’s No.1 cryptocurrency, and other virtual currencies.

Read more: Two lesser-known cryptocurrencies find buyers as investors unload the rest

And see: Bitcoin bloodbath highlights these defensive cryptocurrency strategies

The selling has been blamed in part on worries about increased regulatory scrutiny in South Korea and other countries. Crypto fans are pushing back, with a petition in South Korea against a crackdown scoring more than 200,000 signatures, a level that reportedly merits a government response.

Early Wednesday, bitcoin was losing a fight to stabilize, as it fell below the $10,000 level and traded far off its mid-December peak above $19,000.

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Citi sees bitcoin potentially halving in value again

 

NEW YORK (Reuters) - Bitcoin may lose 50 percent of its value from its current level as fears over regulatory clamp-downs have spurred a rout among cryptocurrencies this week, Citi analysts said on Wednesday.

The world's biggest and best known digital currency, which fell below $10,000 on Wednesday, could fall into a range of $5,605 to $5,673 based on technical factors. This possible move "looks very likely to be very speedy," the analysts wrote in a research note

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