The news sent a shock wave to cryptocurrency market with prices of major cryptocurrencies including bitcoin, ripple and ethereum took a hit following the news that South Korea could be preparing to ban trading in digital currencies.
However, after the Justice Ministry spoke of an impending ban (and, indeed, after the worldwide market took a huge coinciding dip), local reports from South Korea's Ministry of Strategy and Finance (MOSF, a key member of the crypto task force) said that the MOSF does not agree with the "premature statement of the Ministry of Justice about a potential cryptocurrency trading ban".
In the afternoon of January 11, the South Korean government made an official announcement to the public through the Blue House that it will not impose a cryptocurrency trading ban in the short-term, and that the premature statement of Justice Minister Park does not reflect the stance of the South Korean government.
The theory is that the rumours are an FUD-missile meant to drive the price of BTC and other coins down so that crypto whales can buy them up at a "discount".
The current price of Bitcoin at popular Korean exchange Bithumb is $18,301, down 7.13 percent in the last 24 hours, but still significantly higher than CoinMarketCap's current average price of $13,840.
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On the Luxembourg-based Bitstamp, bitcoin lost over 10 percent at $13,199, after falling as low as $13,120 earlier.
Before taking action as drastic as a total ban on all trading, the South is more likely to block foreigners, institutions and minors from owning and trading cryptocurrency.
Many analysts believe that the infatuation for cryptocurrencies in South Korea causes concerns of gambling, especially as bitcoin demand surged and the price skyrocketed in the past one year. While investors and coinholders can get more money out of the virtual currency, it has brought increasing amounts of attention from authorities and regulators. The news follows the news that the country's ban on cryptocurrency exchanges from opening new customer accounts in December 2017, and the incoming ban on anonymous accounts. The Southeast Asian nation carries as much as 20% of the global trade so anything that happens there will have a ripple effect across the markets. He said that no other large exchanges were under police investigation.
To make matters worse, there was also news that the South Korean Justice Department was preparing to roll out legislation that would ultimately end in the closing down of South Korea's cryptocurrency exchanges.
"We were asked by the tax officials to disclose paperwork and things yesterday", the source told Reuters.
Police have been investigating Coinone's margin-trading service since a year ago, according to an official who asked not to be named citing policy.