Monday, 10 December 2018

Bitcoin: South Korea Threatens To Shut Down Exchanges

South Korea will require people who trade Bitcoin and other virtual currencies to do so under their real names, the country's government said on Thursday, as part of efforts to curb speculation.

-South Korea clamps down on BTC after exchange goes bankrupt.

-The government's real motive.

-What does this mean for US investors?

Thursday, South Korea’s government clamped down on national cryptocurrency exchanges by announcing new legislation aimed at reining in rampant speculation.

According to the WSJ, “New proposed legislation in Korea will ban the use of anonymous cryptocurrency accounts starting next month and prevent banks from providing settlement services for unidentified digital-currency trades on bitcoin exchanges.”

This follows the bankruptcy of Youbit–a Korean cryptocurrency exchange that lost 17% of customers’ digital assets, and promised to help repay them by claiming approximately $2.8 million. We all know what happens when insurance firms are forced to cover losses due to fancy financial assets. However, this was no issue with Bitcoin as an underlying asset. The real issue is that exchanges are not adequately secure.

Adding to the SK government’s new rules, the WSJ also reported that “Government officials said they would levy capital-gain taxes on trading cryptocurrencies and restrict financial firms from holding, acquiring and investing in them.”

The Government’s Real Motive

Week ago everybody were bullish on Bitcoin despite its fall. Now that exchanges in Bitcoin’s third-largest market are under scrutiny, I had reconsidered my stance. After thinking it through, I am still bullish (but more cautious).

Yes, the government’s heavy-handed announcement was responsible for Bitcoin’s dip back into the $13k territory, but this is just another hiccup.

Although the SK government (and any government) would not openly admit to this, a major reason for their action was due to taxes. A recent study showed that 3 out of 10 Korean workers owned a cryptocurrency. “More than 80% made money from it...20% made an average return of 425% on their investment.” Also, “the average Korean investor owned $5,260” in cryptocurrencies.

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