One of the world’s biggest economies just banned bitcoin

Bitcoin has been dealt a huge blow by one of the world’s biggest economies, as South Korea announced plans to outlaw the controversial cryptocurrency.

Notoriously volatile virtual currencies plunged in the wake of a government announcement – bitcoin shed almost $2,000 in hours and is currently hovering above the $13,000 marker.

The country’s justice minister this morning said the government is preparing to ban cryptocurrency trading as part of a wider crackdown. Police and tax authorities have raided cryptocurrency exchanges over allegations of tax evasion.

The latest blow for bitcoin, ripple and other technology-driven currencies is more pronounced by the fact South Korea is seen as a crucial source of the demand for cryptocurrencies that has underpinned a mammoth price surge in the last 12 months.

Yesterday, legendary US investor Warren Buffet warned the craze for cryptocurrencies will “come to a bad ending”.

Justice minister Park Sang-Ki said: “There are great concerns regarding the virtual currencies and [the] justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges.”

The ban came after “enough discussions” had taken place between government agencies, the finance ministry and financial regulators.

Bithumb, South Korea’s second largest virtual currency operator, was one of the exchanges to be raided by authorities.

“We were asked by the tax officials to disclose paperwork and things yesterday,” a Bithumb official told Reuters without disclosing their name.