What a Korea Crypto-Trading Ban Means for XML, ETH, XRP, ADA, LTC, and XMR

South Korea considering ban on Bitcoin trading?

In September 2017 China announced a ban on crypto-trading in China whish resulting in shutting down of the oldest Crypto trading platform at BTCC. BTCC had been in operation since 2011 serving the Asia-Pacific region with trading services for the largest crypto coins like Bitcoin and Litecoin.

Following the stop of Chinese trading platforms saw the explosive growth in South Korea and Japan. Chinese customers only limited by the distance of an internet connection moved trading to other markets in the region to continue the movement of digital currency. South Korea now is the largest single market in the world likely fueled by both South Korean and Chinese demand. With a broader market of coins we have seen Ripple (XRP), Stellar (XLM), Cardano (ADA), Litecoin (LTC), and Bitcoin (BTC) have meteoric rises in price since the Sept announcement.

Today we get word of a possible similar ban in South Korea. Korea’s Justice Minister Park Sang-ki announced today the draft of a bill that would ban domestic cryptocurrency trading in South Korea. This follows last years ban on Initial Coin Offerings and trading of coins on Korean exchanges by non-Korean citizens. The entire market has seen a large sell-off with Bitcoin down over 13%, Ethereum off 14%, and Ripple more muted at 5% following the announced partner with Moneygram. No coin in the top 100 was spared a sell-off today with XLM, ADA, IOTA, DASH, Tron, etc all seeing outsize losses in market value.

Should you be concerned?

Hard to say. China is one of the largest markets for crypto currency in the world and the hub for most of the Bitcoin Hash power and yet the ban did not stop market momentum last year. The very nature of crypto currency is digital meaning trading can occur anywhere there is a computer and an internet connection (sorry North Korea). Despite the ban almost anyone in China who wanted to continue trading simply moved to other non-domestic platforms. The is a large reason why Korean exchanges have the large disparity in pricing creating arbitrage opportunities for enterprising investors.

A similar South Korean ban would likely have the same effect. The smaller traders would cash out leaving the whales that dominate markets to move to other markets. Japan would likely be the largest benefactor given the current market size and proximity. Other nations though could see the opportunity and become major players welcoming international transactions. China could re-examine the ban and bring back trading as mentioned by the BTCC CEO Bobby Lee to CNBC just last week. 

China bans Crypto currency trading with markets shut down by Sep 15, 2017. Chart courtesy CoinMarketcap.com

Sell-off creates possible buying opportunity

China shut down domestic exchanges in early September 2017 with withdraws to be complete by Sep 15. The above chart shows the decrease in market price of Bitcoin as the demand for China temporarily disappeared from the world wide market. Traders were forced to liquidate holdings and establish new positions on other trading platforms mostly in Japan and South Korea. This caused a broader market sell-off followed by stabilization of prices and then huge run up as traders moved back in to the market.

At this point the proposed ban is only that – proposed. The Bill is in draft form and would require majority passage through Korea’s parliament. This means any proposed ban might be months or even years away. With large Korean banks like Shinhan getting into the Bitcoin market this may be a tall order to earn votes. In politics, donors often have power. Shinhan and other large players likely have friends in parliament making any passage not certain. Recently, Korean regulators inspected some large Korean financial institutions providing crypto trading to help find ways to reduce risk to customers. Hardly a vote for an outright ban.

With the recent market decline and uncertainty now may be the time to buy selected coins at what could be a discount. Remember, this is not a ban but only a possible draft legislation. Korean markets are still open for trading with trade to Korean Won KRW still ongoing. We can not predict the outcome but with today’s discount on Ripple (XRP), Stellar (XLM), Ethereum (ETH), Cardano (ADA) and may of our other favorites now might be a time to get into the market. As always, invest at your own risk.