Why is South Korea suddenly terrified of bitcoin?

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Usually on the cutting edge of technology, the country unleashes a swift crackdown on cryptocurrencies that threatens to trigger a domino effect in Asia

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A man walks past an electric board showing exchange rates of various cryptocurrencies including bitcoin at a cryptocurrencies exchange in Seoul. Photo: Reuters

David Josef Volodzko

Published: 11:00am, 1 Jan 2018Updated: 8:19pm, 11 Jan 2019

Bitcoin has been hailed as the greatest technological innovation of our time, yet it seems South Korea, one of the most technologically innovative societies, is now not only giving up its role as a leader in the field but aggressively fighting the trend.

Some observers suggest the government has many reasons to be afraid of bitcoin, not the least of which is the cryptocurrency’s potential to be used by Kim Jong-un ’s North Korea as a covert economic weapon. But leaders point to other concerns as well.

South Korea’s Ministry of Justice said on Thursday the country is considering shutting down all local cryptocurrency exchanges, an announcement that sent shockwaves through the industry worldwide. Earlier this week, stock in the internet service provider Pareteum more than doubled after it said it would provide blockchain support services, Bloomberg reported, but fell 25 per cent after Seoul’s comments.

Hong Nam-ki, the minister for government policy coordination, called Korea’s interest in cryptocurrencies “abnormal”, echoing the disdain of Prime Minister Lee Nak-yeon, who last month warned that cryptocurrencies could corrupt Korean youth and lead to “social pathological phenomena”.

Hong Nam-ki, minister for government policy coordination, announces a new policy that would ban opening an anonymous cryptocurrency account. Photo: EPA

After Hong’s announcement, bitcoin prices at the Korean cryptocurrency exchange Bithub fell 13.8 per cent from US$20,181 to US$17,400.