Cryptocurrencies, started the financial bubble?

(by Massimiliano D'Elia) Yesterday Warren Buffet, the American guru of finance and investments, spoke of his succession at the top of the trading company he has been managing for a lifetime and criticized cryptocurrencies saying that his company would not put them never in your wallet. “I don't know them and that's why I don't express myself, however, Buffet points out, I don't believe much in their future”. Yesterday they seemed like words spoken by chance, given that the electronic money market is booming and increasingly constitutes a reference for the economies of countries that are under the shadow of the sanctions of the international community. Let's talk about Iran, Russia, North Korea etc. Also yesterday the most important Chinese trading company in virtual currency, after noting some problems at home, announced the opening of a branch in Zug, Switzerland. Apparently everyone already identifies Zug as the nascent "crypto valley".

It all happened Yesterday. In South Korea, companies operating in the sector have been subjected to searches and seizures of financial statements and documents. The government of Seoul has been following the evolution of this activity for some time and has noticed that commercial exchanges through crypto currency have increased dramatically, surpassing those of traditional currency. This activity, apparently, was not profitable for the nation's coffers due to tax evasion. The awareness that the authority can block and impose rules on this "under the table" market has sent the value of electronic money into a tailspin, generating global concerns for investors who believed in this new business.

The developments of the story, to date, are unpredictable and it will be necessary to see if the persistence of fear can give birth to a new financial "bubble" capable of conditioning ordinary markets.

In detail, let's see what happened in South Korea.

The South Korean government has announced its intention to ban cryptocurrency trading, precipitating bitcoin prices and throwing the virtual money market into turmoil as police and tax authorities of the nation raided the exchange offices for alleged evasion tax.
The shutdown of South Korea, a crucial source of global cryptocurrency demand, came as policymakers around the world struggled to regulate an asset whose value has skyrocketed over the past year.
Justice Minister Park Sang-ki said the government is preparing a bill to ban virtual currency trading in domestic trade.
A press official said a proposal to ban cryptocurrency trading was announced after "discussions" with other government agencies, including the nation's finance ministry and financial regulators.
Once a bill is drafted, legislation for an outright ban on virtual currency trading will require a majority vote of the 297 total members of the National Assembly, a process that could take months or even years.
The tough position of the government has triggered a selloff of cyrptocurrency on both local and offshore exchanges.
The local bitcoin price fell to 21% in the noon trade at 18,3 million won ($ 17,064,53) after the minister's comments. It is still trading at around 30 percent of the premium compared to other countries.
Bitcoin fell by more than 10 percent on the Bitstamp based in Luxembourg to $ 13,199, after falling to $ 13,120, the weakest from the January 2.
Shares related to South Korea's cryptocurrency have also taken a hit. Vidente and Omnitel, who are Bithumb's stakeholders, have slipped from the daily trading limit of 30 percent each. Park Nok-sun, a cryptocurrency analyst at NH Investment & Securities, said the authorities' behavior in South Korea's virtual currency market raised concerns.
Indeed, bitcoin's 1.500% spike last year fueled a huge demand for cryptocurrency in South Korea, attracting both college students and housewives and sparking concerns of a gambling addiction. There are more than a dozen cryptocurrency exchanges in South Korea, according to the Korea Blockchain Industry Association.
The proliferation of virtual currency and the resulting commercial frenzy have attracted the attention of financiers globally, although many central banks have refrained from controlling the cryptocurrencies themselves.
The news about the ban proposed by South Korea came when the authorities tightened their grip on some of the cryptocurrency trade.
The nation's largest cryptocurrency exchanges such as Coinone and Bithumb have been subjected to searches by police and tax agencies this week for alleged tax evasion. The searches follow the moves of the finance ministry to identify ways to tax the market that has become as large as the nation's small-cap Kosdaq index in terms of daily trading volume.
Some investors, however, appear to have taken preventive measures.
“I already cashed out most of my (virtual coins) because I knew something would come up in a couple of days,” said Eoh Kyung-hoon, a 23-year-old investor.
Bitcoin sank Monday after the CoinMarketCap website removed prices from South Korean exchanges, as the coins were trading at a premium of around 30% in Asia's fourth-largest economy. This has created confusion and triggered a large selloff among investors.
A Coinone official told Reuters National Tax Service officials broke into the company's office this week.
"Even the local police have been investigating our company since last year, they think what we do is gambling," said the official, who spoke on condition of anonymity, adding that Coinone was still cooperating in the investigation.

Bithumb, the second virtual currency operator in South Korea, has undergone police checks.
"Tax officials have asked us to take budget documents," said a Bithumb official, asking for anonymity due to the sensitivity of the problem.
The nation's tax office and police refused to confirm whether they broke into local trading offices.
South Korean financial authorities had previously said they are inspecting six local banks offering virtual currency accounts to institutions, amid concerns that the increasing use of such assets could lead to an unprecedented crime wave.

Cryptocurrencies, started the financial bubble?