What you need to know:
About one million South Koreans, many of them small-time investors, are estimated to own bitcoin.
Demand is so high that prices for the unit are around 20 per cent higher than in the US, its biggest market.
A South Korean exchange trading bitcoin and other virtual currencies declared itself bankrupt on Tuesday after being hacked for the second time this year, highlighting the risk over cryptocurrencies as they soar in popularity.
The Youbit exchange said it had lost 17 per cent of its assets in the attack on Tuesday.
It came eight months after nearly 4,000 bitcoin — then valued at 5.5 billion won ($5 million) and nearly 40 percent of the exchange's total assets — were stolen in a cyber attack blamed on North Korea.
"We will close all trades, suspend all deposits or withdrawals and take steps for bankruptcy," the exchange said in a statement which did not assign blame for the latest attack.
All its customers will have their cryptocurrency assets marked down by 25 per cent, it said, adding it would do its best to "minimise" their losses by using insurance and selling the remains of the firm.
The exchange — founded in 2013 — brokered trades of multiple virtual currencies including bitcoin and ethereum.
It is the first time that a South Korean cryptocurrency exchange has gone bankrupt.
Investing in virtual currencies has become hugely popular in the hyper-wired South, whose trades account for some 20 per cent of global bitcoin transactions.
About one million South Koreans, many of them small-time investors, are estimated to own bitcoin. Demand is so high that prices for the unit are around 20 per cent higher than in the US, its biggest market.
Global bitcoin prices have soared around 20-fold this year.
Concerns over a potential bubble have unnerved Seoul's financial regulators, who last week banned its financial institutions from dealing in virtual currencies.