Bitcoin slumped as South Korea's justice minister reiterated his proposal to ban cryptocurrency exchanges, fueling concern a government crackdown will erode one of the world's biggest sources of demand for digital funds.
The minister's comments were later played down by a spokesman for President Moon Jae In, who said no course of action had been finalized.
Seoul unveiled multiple options for cryptocurrency exchange regulation on December 28, including allowing trading to continue under tighter supervision.
Bitcoin dropped as much as 12 percent to US$12,801 (HK$99,591) yesterday before paring its loss to about 7 percent. Ripple fell 13 percent and ethereum slumped 5 percent. Governments around the world are increasing scrutiny of cryptocurrencies as soaring prices attract everyone from mom-and-pop investors to Wall Street banks.
South Korea emerged as something of a ground zero in the speculative mania, playing host to several of the world's most active exchanges.
The boom has alarmed South Korean authorities. The country's prime minister has said cryptocurrencies might corrupt the nation's youth, while the government warned in December it would be conducting on-site investigations of exchanges.
Finance ministry officials are also studying a cryptocurrency tax.
Warren Buffett sees the extraordinary rise in value of cryptocurrencies as fleeting.
"I can say almost with certainty that they will come to a bad ending," he said on CNBC on Wednesday. "When it happens ... I don't know. But I know this: if I could buy a five-year put on every one of the cryptocurrencies I'd be glad to do it. But I would never short a dime's worth."