South Korea Cracks Down on Bitcoin, Considers Shutting Down 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.