South Korea's Crackdown on Cryptocurrency Influences Drop in Bitcoin Price

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After forming a high of $16416 this week, the cryptocurrency came under a selling pressure as traders showed their reaction to South Korea's news.

South Korea is a hub for digital currency trading, reportedly accounting for 20pc of global Bitcoin transactions.

"Cryptocurrency speculation has been irrationally overheated in Korea".

The new rules will target anonymous trading of virtual currencies and crack down on money laundering activities, Seoul said.

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Following the news, Bitcoin's price dropped 11 percent from $15,489 to $13,800, according to Coinbase.

As per Reuters, in order to curb the widespread speculation growing amongst investors, the new regulations could include the prohibition of anonymous trading accounts operating within the country with authorities having the right to even shut down exchanges if needed. The price of Bitcoin and other cryptocurrencies have been consistently higher in Korean exchange than in foreign markets. So, it may be a bit unfair to think that if the currency is supported by retail clients it has no value and if it is supported by institutions than it has more value.

Financial records of cryptocurrency trading will also be used to levy taxes, and exchanges can be closed "if there is a need to do so", according to Minister of the Office for Government Policy Coordination Hong Nam-ki. "We can not leave the abnormal situation of speculation any longer".

The announcement comes less than two weeks after South Korean cryptocurrency exchange Youbit was hacked. However, this is surely not the first time that we have witnessed this kind of reaction in the Bitcoin price. While bitcoin's debut on regulated derivatives exchanges in Chicago was thought to have given it a new mainstream channel for investors to tap, so far trading volume has been limited.