After the huge losses experienced over the past month or so, cryptocurrency investors now face new fears of a further price decrease brought on by new regulations implemented by the South Korean government on Tuesday. Prices of Bitcoin, Ethereum and other major cryptocurrencies already suffered a slight drop earlier in the month after investors were seemingly spooked by the announcement that South Korea’s Financial Services Commission would be implementing new measures designed to limit the ability of cryptocurrencies to be used for illegal activities and money laundering.
South Korea is the world’s third-largest cryptocurrency market behind Japan and the United States, and many investors fear that the new regulations will lead to a drastic reduction in the number of Koreans buying and selling Bitcoin and other digital currencies. Compared to Japan and the United States, South Korea is still quite a small market. Approximately 4 percent of all Bitcoin is traded in Korean won compared to the approximately 30 percent that is traded in US dollars and the 40 percent traded in Japanese yen. Nonetheless, the new regulations still have the possibility to impact the cryptocurrency market as a whole. This is especially true if other world governments follow suit and implement their own regulations to limit the anonymity inherent in cryptocurrency trading.
Although it is still far too early to tell what the overall long-term impacts of the new regulations will be, the price of most cryptocurrencies immediately dropped as soon as the South Korean government announced that the regulations had been implemented. As of writing, the price of the world’s five most popular cryptocurrencies—Bitcoin, Bitcoin Cash, Ethereum, Ripple and Litecoin—was down due to the new regulations. The price of Bitcoin dropped by 3 percent, and a similar decrease was seen in most rival coins.
However, many experts believe that the new regulations will actually bring benefits in the long run by helping Bitcoin and other cryptocurrencies to shed their link to money laundering and other criminal activities. As part of the new regulations, South Koreans are now only able to trade cryptocurrencies using a bank account listed in their real name. By making anonymous transactions impossible, the new regulations could actually bring in many new investors by providing increased security and consumer confidence. Nonetheless, many experts still expect that the new regulations will lead to some short-term losses, while investors are hoping that this will be balanced out by long-term gains.