Business

South Korea bans its banks from dealing in bitcoin

SEOUL: South Korea yesterday banned its financial institutions from dealing in virtual currencies such as bitcoin, as the crypto-currency soars in a bubble fuelled by retail speculators, many of them from the country.

The hyper-wired country has emerged as a hotbed for crypto-currency trading, accounting for some 20 per cent of global bitcoin transactions - about 10 times its share of the world economy.

About one million South Koreans, many of them small-time investors, are estimated to own bitcoins, and demand is so high that prices for the unit are around 20 per cent higher than in the United States, its biggest market.

Bitcoin prices have surged globally, soaring from less than US$1,000 (S$1,350) in January to $17,000 (S$23,000) this week.

The Prime Minister's Office said Seoul would ban financial institutions from dealing in virtual currencies - including buying, possessing, or holding them as collateral.

Prices on Bithumb, South Korea's biggest bitcoin exchange, fell nearly five per cent after the announcement. But the measures fell short of speculation that authorities might ban bitcoin trading in South Korea altogether, or tax profits from it.

Nonetheless initial coin offerings - where companies sell newly invented crypto-currencies to investors for real money - will be outlawed, the Prime Minister's Office said in a press statement. - AFP

BUSINESS & FINANCE