News of a bitcoin crackdown in South Korea sent the market for digital coins into a tailspin Thursday morning.
The market for digital coins was under intense pressure Thursday morning amid reports that South Korea has a bill in the works to ban cryptocurrency trading.
"South Korea's justice minister said on Thursday the ministry is preparing a bill to ban cryptocurrency trading through its exchanges," Reuters reported.
That news was on the heels of a report that authorities were raiding cryptocurrency exchanges in the country.
“A few officials from the National Tax Service raided our office this week,” a representative of Coinone, a South Korean crypto exchange, told Reuters.
According to the Reuters report, South Korean authorities also were looking into Bithumb, another cryptocurrency exchange.
At the time of writing, bitcoin was trading down more than 9% at $13,458 a coin, according to data from Markets Insider. At one point, the entire cryptocurrency market was down more than $100 billion at $636 billion. It hit an all-time high of $830 billion earlier this month, according to data from CoinMarketCap.
Still, some cryptocurrency enthusiasts saw the move as a positive sign for the market.
"If the Korean government takes a similarly aggressive stance to crypto exchanges as was taken in China, then we can likely expect to see a number of the major exchanges move to jurisdictions that have a clearer regulations," Sebastian Quinn-Watson, an executive at Blockchain Global, told Business Insider.
Chinese regulators began their own crack down on cryptocurrency exchanges in 2017. It was a move investors shook off after an intense sell-off.
"Japan is the likely beneficiary of this move," Quinn-Watson added. "End point, high quality, well-run exchanges will thrive and poorly-run exchanges will perish and the consumer and market will benefit."
South Korea has been a hot market for cryptocurrencies. Bitcoin, for instance, has traded at a more than 40% premium on exchanges in the country relative to US exchanges. According to Josiah Hernandez, chief strategy officer at Coinsource, that demand will make it hard for regulators to follow through on a full ban.
"Even with massive discounts applied to account for margin trading, exchange volumes indicate meaningful underlying retail demand for bitcoin," Hernandez said. "It's doubtful that's going to just disappear."
Still, notable Wall Streeters such as JPMorgan chief executive Jamie Dimon have said governments would be bitcoin's main impediment.
"The other thing I've always [said] about bitcoin, governments — and this is not a technological statement — governments are going to crush it one day," Dimon said of bitcoin. "Governments like to know where the money is, who has it and what you're doing with it, in case you haven't noticed."
Dimon famously called bitcoin "a fraud" in September, but stepped away from those remarks Tuesday.
The news of the crackdown follows a Wall Street Journal report Monday that regulators in South Korea were preparing a wide-ranging inspection on six commercial banks that manage "virtual" bitcoin accounts. Virtual accounts, according to The Journal, are where investors can store fiat money when they buy or sell crypto.
“There is growing concern that banks, which should actively act as gatekeepers to prevent the distribution of crime and illegal funds, are aiding and encouraging them,” Choi Jong-ku, head of South Korea’s Financial Services Commission, said.