The price of bitcoin dropped sharply on Thursday after South Korea said it planned to ban trading in cryptocurrencies.

The move came after police and tax authorities reportedly raided local exchanges this week over alleged tax evasion.

The digital currency fell more than 10 per cent from over $15,000 (£11,100) to around $13,300 in the early hours of Thursday morning UK time, before paring some of its losses.

South Korea has been one of the keenest adopters of bitcoin but the country’s justice minister, Park Sang-ki, said in a press conference on Thursday that the government had “great concerns” about digital currencies, Reuters reported.

The justice ministry is “basically preparing a bill to ban cryptocurrency trading through exchanges,” Mr Park said.

Legislation imposing a ban will be subject to a majority vote of the 297-member National Assembly.

The news comes after the South Korean government banned cryptocurrency exchanges from opening new customer accounts in December as it attempted to rein in speculation which has seen prices swing wildly in recent months.

Politicians and central bankers around the world have warned that bitcoin and other digital currencies are extremely risky investments that have the potential to crash.

Until now, authorities have largely stopped short of direct intervention, but increasing fears about scams, money laundering and hacks linked to cryptocurrencies, could attract further attention and mean more crackdowns in future. 

In December, the Bank of England set up a research team to investigate how digital currencies might impact the financial system, but imminent regulation in the UK appears unlikely. The BoE’s deputy governor in charge of financial stability, Sir Jon Cunliffe, said in November that bitcoin was not big enough to unsettle the global economy, but that “investors need to do their homework”. 


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