South Korea on Wednesday banned its financial institutions from dealing in virtual currencies such as Bitcoin, as the cryptocurrency soars in a bubble fuelled by retail speculators, many of them from the country.

The hyper-wired country has emerged as a hotbed for cryptocurrency trading, accounting for some 20 percent of global Bitcoin transactions -- about 10 times its share of the world economy.

About one million South Koreans, many of them small-time investors, are estimated to own Bitcoins, and demand is so high that prices for the unit are around 20 percent higher than in the US, its biggest market.

World Bitcoin prices have surged globally this year, soaring from less than $1,000 in January to $17,000 this week.