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The country that plans to ban bitcoin trading

Bitcoin has been soaring in value for the past year but now appears to be on the slide (Jaap Arriens | NurPhoto | Getty Images)

South Korea is poised to ban trading in cryptocurrencies such as bitcoin.

The announcement sent bitcoin prices plummeting and threw the virtual coin market into turmoil.

Police and tax authorities also carried out raids on local exchanges on alleged tax evasion.

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Justice minister Park Sang-ki said the government was preparing a bill to ban trading of the virtual currency on domestic exchanges.

“There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” Park said.

Legendary investor Warren Buffett says virtual currencies such as bitcoin will not end well (REUTERS/Rick Wilking)

Bitcoin fell about 8% to just under $13,600 (£10,200) on Thursday – having been trading at almost $18,000 a few days ago.

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Digital currencies such as bitcoin, dogecoin and ripple have surged in value over the past year – driving a huge demand.

But seasoned investors have been warning that this wave will soon die. Billionaire investor Warren Buffett said on Wednesday: “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending.”

South Korea’s justice ministry said the proposed ban on cryptocurrency trading was announced after “enough discussion” with other government agencies, including the nation’s finance ministry and financial regulators.

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Once a bill is drafted, legislation for an outright ban of virtual coin trading will require a majority vote of the total 297 members of the National Assembly, a process that could take months or even years.

The government’s tough stance triggered a selloff of the cryptocurrency on both local and offshore exchanges.