Bitcoin plummets as South Korea announces plans to ban all cryptocurrency trading

South Korean authorities are preparing to ban all cryptocurrency trading, the country's justice minister announced on Thursday.

"There are great concerns regarding virtual currencies and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges," Park Sang-ki said in a statement distributed by the ministry's press office, according to Reuters.

Park said he could not disclose details but would jointly work with a government task force to shut down virtual currency exchanges in South Korea, which is one of the world's biggest markets for the likes of bitcoin and etherum.

The news sent crypto markets into free fall, with bitcoin down around 14 per cent to US$12,845 ($17,864), ethereum down around 10 per cent to US$1,190 ($1,655) and ripple down more than 17 per cent to US$1.66 ($2.31) at the time of writing.

According to industry website CryptoCompare, more than 10 per cent of ethereum is traded in South Korean won, second only to US dollars which account for around 32 per cent. Nearly 14 per cent of ripple and 5 per cent of bitcoin is traded in won.

It came after a spokesman for the Coinone exchange earlier told Reuters that "a few officials from the National Tax Service" had raided their office this week, with police investigating suspected "gambling".

Read more: A 'bad ending' is coming for cryptocurrencies, warns Buffett

Last week, South Korean authorities reportedly began inspections at six banks that provide accounts to companies involved in cryptocurrency trading, citing concerns about potential money laundering.

Meanwhile, Chinese authorities are planning to crack down on bitcoin miners in order to "guide" them towards an "orderly exit" from the country.

"The regulatory noise in South Korea and China, that's going to be an ongoing threat to bitcoin and to crypto more generally for the foreseeable future," ABC Bullion chief economist Jordan Eliseo said earlier this week.

"Governments, financial institutions, you name it, are still working out how best to deal with crypto and the businesses involved with it."

On Monday, the widely used research website Coinmarketcap removed average price data from three South Korean exchanges, Bithumb, Coinone and Korbit, where prices are typically 30 per cent higher on average.

In an interview with CNBC on Wednesday, billionaire investor Warren Buffett warned cryptocurrencies would almost certainly "come to a bad ending".