South Korea Cracks Down on Bitcoin, Considers Shutting Down Exchanges

Mish

South Korea seeks to curb widespread speculation fueling cryptocurrencies. It even considers shutting down the exchanges

The Wall Street Journal reports South Korea Considers Shuttering Bitcoin Exchanges.

New Proposals

New proposed legislation in Korea will ban the use of anonymous cryptocurrency accounts starting next month and prevent banks from providing settlement services for unidentified digital-currency trades on bitcoin exchanges, according to a statement from the government on Thursday.

The government also cautioned that digital currencies could be "vulnerable to the damage from investment fraud or hacking attacks on the exchanges."

Background

Last week, Youbit, a Seoul-based cryptocurrency exchange, suspended trading and filed for bankruptcy after it was hacked a second time in eight months and lost a chunk of its digital currency reserves. Investigators in South Korea are looking into North Korea's possible involvement after the exchange collapsed.

Ponzi Scheme?

Bitcoin may be a bubble, and it is a proven subject of hacking attempts, but it's not a classic Ponzi scheme as many have declared.

Bitcoin a Symptom of the Real Problem

I understand the money laundering charges, but the fundamental reason is avoidance of capital controls that countries put on, repressing citizens.

China ranks a miserable 112 out of 159 countries in terms of economic freedoms. Venezuela is dead last. For details, please see Economic Freedom: Best and Worst Countries, US Timeline History.

Bitcoin is simply the vehicle of choice to get around capital controls. It makes sense for Venezuelans to trade their worthless Bolivars for darn near anything. It makes sense to use Bitcoin to get money out of China.

Mike "Mish" Shedlock

Comments (20)
No. 1-20
martyzigman
martyzigman

Say it isn't so. Has Mish started to warm to Crypto?

Mike Mish Shedlock
Mike Mish Shedlock

Editor

My position on Bitcoin has not changed for years!

douglascarey
douglascarey

My position is that it will go to zero or darn near it. It's backed by nothing and is therefore pretty much worthless. Mish, what is your position exactly?

AWC
AWC

"Bitcoin is simply the vehicle of choice to get around capital controls."

AWC
AWC

And government will simply shut it down for that reason.

SweetKenny
SweetKenny

Why work or save when Bitcoin just keeps going up? It worked for housing and the stock market right? What could go wrong!

Blacklisted
Blacklisted

Douglascarey, Bitcoin is backed by the currency that bought it, and it's also backed by the work/mining that validates the transactions. It's the current fiat of all the major countries that is in trouble. Thus the demand for cryptos.

scottel
scottel

There is no work accomplished. It's a computer running open loop doing meaningless calculations.

MorrisWR
MorrisWR

Bitcoin is a classic bubble, however, crypto currencies are useful where capital controls exist. It does not matter if countries crack down on crypto since any half intelligent person could get around any devices the governments employ. I see this as the main benefit of bitcoin and other cryptos. The problem is with rampant speculation poor people in repressive countries cannot utilize the currencies. Few in Venezuela can take advantage at high prices.

Seb
Seb

And governments will shut it down.... please. They’d have to shut down the internet. They’d definitely make it illegal- like Venezuela, China and Zimbabwe did. China had to relent. Seriously, just because the government makes shit illegal doesn’t mean people won’t use it. Just look at heroin and meth. Shits illegal and people use it every day. So are fully automatic weapons. Seen those fired a few times myself. Where is everyone’s balls here? Short of shutting down the internet they can’t stop it. China puts in new ways to blockade their internet and people find ways around ALL the time. If they make Bitcoin illegal IT WILL GO BACK TO BEING A DRUG RUNNERS CURRENCY!!! The dealers would love that just like they loved it when no one was paying attention to it 8 years ago.

kram
kram

@Blacklisted. Simply because a bunch of CPUs are doing some "work" does not attach value to it. What does it produce of value that will permit attaching that value (or a part thereof) to Bitcoin?

Stuki
Stuki

The work done by bitcoin miners, serve the same purpose as that done by gold miners. Neither add much ‘useful’ value per se. But both serve to restrict supply, without giving de jure privilege to mine only to those deemed more equal. Without this kind of work, there currency.

Stuki
Stuki

....there simply cannot be a legitimate currency.

Ghosting
Ghosting

Someone is trying to equate the real work of gold mining to BTC mining? Where are these great drugs that I'm missing out on?

TFMKTS
TFMKTS

I think governments will more aggressively target crypto this year.

Blacklisted
Blacklisted

The ignorance of Bitcoin and software technology is breathtaking. I suppose there is no work done by the software used to bring robots to life that build/make most everything we buy. The tokens/businesses that utilize the cryptocurrencies will dramatically improve supply chain efficiencies. People in remote areas that don't have access to banks can now participate in the global economy with cryptos. Please do your homework before spouting off your beliefs and biases.

Blacklisted
Blacklisted

It may help to consider the source of those critical of cryptos. Most, like the banksters, will lose business. The big concern for these people are that the wrong people are getting rich -
http://www.zerohedge.com/news/2017-12-27/why-status-quo-disdains-bitcoin-wrong-people-are-getting-rich.

Of course, the establishment and the connected class cannot be cut out, which of course is why the demonization has begun, this time by the Leftist propaganda mouthpiece, WAPO - https://www.zerohedge.com/news/2017-12-28/demonization-begins-wapo-ominously-warns-bitcoin-being-used-extremist-groups.

CautiousObserver
CautiousObserver

The nuances that define a currency and differentiate crypto from a pyramid scheme are interesting to think about. Bitcoin would be a classic pyramid scheme except for one huge difference: Bitcoin makes no distributions. No distributions means there is not a mathematical guarantee the price of Bitcoin will collapse in the future. Notwithstanding that, the price still could completely collapse.

Saying that “Bitcoin is backed by the currency that bought it, and it’s also backed by the work/mining that validates the transactions” does not ring true for me. To be “backed,” the price needs to be anchored by something other than incoming capital flows, which can easily turn negative. The work to maintain the Bitcoin ledger of transactions is certainly real work, but the issuance of Bitcoin to miners is like an ongoing stock compensation plan that pays employees by diluting shareholders. If anything, mining distributes the cost of maintaining the blockchain to everyone in the system and exerts slight downward pressure on the price.

If one thing separately supports the price of Bitcoin, it is probably the exchanges and dominant owners that have a vested interest in seeing widespread adoption become a reality. The thinking seems to be that crypto can become bona-fide currency if adoption is sufficiently broad, because broad adoption is its own anchor. While that might be true in much of the software world, it remains to be seen if that holds true in the currency world. It is tantalizing to hope that crypto might stem abuses foisted upon us by our central banks and governments. I have my doubts. Crypto is lacking an army of lawyers and politicians to defend it.

killben
killben

"The problem isn't Bitcoin. The problem is insufficient economic freedoms coupled with central bank policies that debase currencies and promote speculation" Agreed. But when the politicians and central bankers can clamp down on it anytime, how is it going to help? You end up exchanging fiat for bitcoin with both being worthless.

killben
killben

From 2009 it has been clear that the central banksters will act in concert if required. After all they have arrogated to themselves the job of protecting the world, despite being themselves clueless ... Bernanke in 2007 is living proof, Till-then "The Maestro" in 2009, Queen of England whether economists were actually literates etc.


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