Police and tax agencies in South Korea raided exchanges of cryptocurrencies searching for evidence of potential tax evasion. Coinone and Bithumb are under investigation for quite some time, but these fresh raids are a ramping up of these efforts.

In addition, there are reports by SBS that authorities in the Asian nation are working on legislation that will shut down these digital coin exchanges. The most extreme measure could be declaring trading in cryptocurrencies is illegal, thus shutting down the exchanges. The country is home to the third-largest trading volume in bitcoin.

The presidential office in Seoul said that the banning of the cryptocurrency market has not been finalized, at least not yet/ However, they did call bitcoin trading a “serious pathological phenomenon” in the recent past. The Financial Services Commission of Korea has previously banned ICOs, trading in bitcoin futures, and anonymous crypto trading accounts.

Significant fall

The prices of most cryptocurrencies are falling. At the time of writing, here are the moves, prices in USD:

The negative case

This is a negative development, at least in the short term, and it is easy to make the negative case.

South Korea is one of the biggest hubs for trading digital currencies. Closing the exchanges in such a critical market deals a blow to the prices of cryptocurrencies and to the development of the blockchain technology, which needs investment. Higher interest and higher prices attract more money also into research and making new real-world applications with this technology.

South Korea is a special market also in another sense: due to various capital controls, there have often been differences between prices of cryptocurrencies in Korea and elsewhere. This divergence cannot be tapped into: it is very hard to make arbitrage trades as moving money in and out of the nation is complicated.