The South Korean government’s announcement of a ban on anonymous Bitcoin trading has sent the cryptocurrency’s value tumbling by 10%, as fears grow over increased regulatory crackdown around the world.
The announcement targets one of the central principles behind Bitcoin – that its trading can be done anonymously – by forcing anyone trading it to identify themselves. This is a potentially serious move by South Korea, whose enthusiasm for the cryptocurrency was one of the key driving factors behind its success, with Korean buyers having to pay a surcharge due to the massive demand from the country.
This latest setback for Bitcoin comes among increased global scrutiny on the part of national governments and banks, whose concerns around the potential for criminals to use Bitcoin to hide their activities have led them to take new regulatory measures. Also this week, Sweden’s largest bank, Nordea, banned its employees from trading in Bitcoin, a measure designed to avoid accidentally exposing the bank to the profits of illegal activity by trading it.
The new South Korean regulations stop short of the measures that some traders had feared, namely that the country would ban Bitcoin trading entirely. However, they do still impose unprecedented regulation. Local Korean banks will now have to verify a person’s identity before every transaction they make in Bitcoin, extending the existing ban on ‘virtual’ accounts that let anyone set up a Korean bank account and trade in the country, whether they were resident or not. Existing accounts not linked to a user will be banned and closed.
As well as ending the practice of anonymous trading, the new rules will force a greater degree of transparency on the secretive cryptocurrency, which has so far made its name for the discretion of its transactions. In what is seen as a move to more effectively regulate and tax Bitcoin transactions, the South Korean government now requires greater access to the records of individual transactions from banks – something the Government says will help curb illegal activity and slow the expansion of any potential ‘bubble’.
Bitcoin traders will now be looking to the G20 meeting in March, where it is speculated that the world’s leading finance ministers will impose world-wide regulations on Bitcoin, which may spark further falls.