The price of bitcoin has plummeted following an announcement by the South Korean government that it will ban cryptocurrency trading.

Newsagency Reuters reported on Thursday that South Korea’s justice minister Park Sang-ki was preparing a bill that would outlaw the buying and selling of altcoins.

“There are great concerns regarding virtual currencies and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” Reuters reported Mr Park as saying.

The announcement followed reports that South Korea’s police and tax authorities raided local exchanges on alleged tax evasion.

The news appeared to send bitcoin and other cryptocurrencies plummeting.

Bitcoin was down 5.21 per cent on the previous day.

Ethereum and Litecoin, two of the biggest altcoins after bitcoin, were down 11.99 per cent and 5.10 per cent respectively.

Ripple meanwhile, which last week surpassed Ethereum and Litecoin as the most valuable cryptocurrency after Bitcoin, was down 13.85 per cent.

Of 29 cryptocurrencies listed on cryptocompare.com, all but two saw significant losses.

The two to post increases were Gatecoin and BitBay.

South Koreans are some of the most avid cryptocurrency traders. According to cryptocompare.com, nearly 5 per cent of global Bitcoin trades are in Korean won.

That makes South Korea’s currency the fifth biggest currency in the Bitcoin trade, behind the Japanese yen, the US dollar, the Chinese renminbi, and the euro.