A series of measures have failed to curb overheated VC speculation in the country and Park said it would be “devastating if the bubble bursts”.

Seoul: Bitcoin and other virtual currencies (VCs) were sent on rollercoaster rides in South Korea on Thursday as the government said it was planning to ban cryptocurrency exchanges, before later backtracking.

Justice minister Park Sang-Ki said Seoul was preparing a bill to shut down the country’s virtual coin exchanges, sending bitcoin and other virtual unit prices into a tailspin.

“The ministry is preparing legislation that basically bans any transactions based on a virtual currency through the trading floor,” he said.

Authorities had “grave concerns” over the craze and were “aiming to close virtual currency exchanges” in the country, he said. “It has started to resemble gambling and speculation,” Mr Park added, citing the fact that bitcoin prices are higher in South Korea than globally — the so-called “kimchi premium”.

The hyper-wired South has emerged as a hotbed for cryptocurrency trading, accounting for some 20 per cent of global bitcoin transactions — about 10 times its share of the world economy.

A series of measures have failed to curb overheated VC speculation in the country and Park said it would be “devastating if the bubble bursts”.

His remarks sent bitcoin prices plunging 18 per cent on South Korean exchange Bithumb, while ethereum slumped 23 per cent.

Investors flooded the presidential Blue House website with hundreds of online petitions against the shutdown, which was swiftly reversed.

A shutdown was “one of the measures that have been prepared by the justice ministry”, chief press secretary Yoon Young-Chan said in a statement, “but it is not a finalised decision”.

Cryptocurrencies rapidly reversed course, with bitcoin climbing back to trade just 6.5 per cent down, and ethereum off 12 per cent.

A representative of Bithumb, one of around 20 VC exchanges in South Korea, said the company was watching developments closely.

“We’re closely monitoring government moves. We have nothing further to say at this moment”, she told AFP.

Bithumb was raided by tax authorities on Wednesday who inspected the company’s documents.

On the same day financial authorities inspected six local banks that offered virtual accounts for corporate customers.