Bitcoin prices plunged as much as 13% on Thursday after South Korean government said it was planning to ban cryptocurrency trading in the country. South Korea is one of the biggest sources of global demand for bitcoin and other cryptocurrencies. That’s why bitcoin trades at nearly 30% premium in South Korea compared to other countries. After the government’s comments about bitcoin ban, prices in the local market plunged as much as 22%.

Korea preparing a bill to ban cryptocurrency trading

Governments around the world have been struggling to regulate cryptocurrencies while their prices have skyrocketed by more than 1000% since last year. South Korea’s Justice Minster Park Sang-ki told media that the government was preparing a bill to ban cryptocurrency trading on domestic exchanges. A Justice Ministry official added that the proposed bitcoin ban was announced after “enough consideration” with other agencies such as the country’s central bank and Finance Ministry, reports Reuters.

Ethereum, another popular cryptocurrency, also saw its prices fall by 12% to trade at around $1,200. According to CryptoCompare, more than 10% of ethereum is traded against the South Korean won. Ripple also lost 14% of its value to trade at $1.74 per coin while Litecoin was down by more than 5%.

The Korean Justice Minister said virtual currencies were causing the government “great concerns.” The statement came just days after the police and tax authorities raided local cryptocurrency exchanges over alleged tax evasion. Bithumb, one of the world’s largest bitcoin exchanges, told media that tax officials visited their offices earlier this week and asked the exchange to “disclose paperwork and things.”

Another exchange Coinone has come under investigation on suspicion of having facilitated illegal gambling through virtual currencies. The Korean government had said last month that it would monitor cryptocurrencies more closely. It had warned that it could ban anonymous cryptocurrency accounts and provide necessary measures to shut down the exchanges. According to the Korea Blockchain Industry Association, there are more than a dozen cryptocurrency exchanges in the country.

Bitcoin ban may not come into effect anytime soon

Bitcoin’s skyrocketing prices have lured students, housewives, and retirees to pour their money into cryptocurrencies. It has sparked fears of widespread gambling addiction in the country. Wild price swings are a norm in the cryptocurrency market due to low trading levels and a small number of people holding cryptocurrencies.

Korea’s Justice Ministry is preparing legislation that would shut down the cryptocurrency exchanges. But there is still a long way to go. Once the bill is drafted, it would become law only after a majority of 297 members of the National Assembly vote in favor of the bill. This process could alone take months or years, according to Reuters.

EST Securities chief analyst Mun Chong-hyun said the legislation would make trading “difficult here, but not impossible.” It would become difficult for traders and hackers to cash out their gains in the country, but they could go overseas.

Cryptocurrency traders have opposed the government’s decision to impose bitcoin ban. On Thursday, nearly 60,000 people from South Korea signed a petition asking the presidential Blue House to stop targeting cryptocurrencies. The Presidential Office later said that bitcoin ban hadn’t yet been finalized, though it was one of the measures the government was considering.

China begins process to eradicate the cryptocurrency mining industry

South Korea is not the only country cracking down on cryptocurrencies. China, where more than 75% of the world’s bitcoins are mined, has asked its provincial governments to get miners to “exit the cryptocurrency mining industry.” Beijing hasn’t outrightly banned bitcoins, but it has cited financial risk and excessive electricity consumption as reasons why it wants to “eradicate” the cryptocurrency mining industry.

Many central bankers have also indicated that they were exploring options to tighten the regulations around bitcoin. Central bankers or governments have little control over bitcoin and other cryptocurrencies. They would not want cryptocurrencies to take the place of traditional currencies such as the dollar, yen, pound or euro. They believe that cryptocurrency is neither a means of payment nor a store of value, which means it lacks the basic requirements to serve as a currency.

In the future, the central banks could target cross-border payments in cryptocurrencies. They could also crack down on the flow of money between individuals and exchanges. People have to first transfer money from their bank accounts to a bitcoin exchange before they could carry out bitcoin transactions. Since last month, many Australian banks have frozen the accounts of bitcoin investors and blocked them from transferring money to bitcoin exchanges.