South Korea’s central bank says cryptocurrencies pose ‘insignificant’ threat
South Korea’s central bank said in a report over the weekend that cryptocurrencies posed an ‘insignificant’ threat to the financial stability of local capital markets.
The Bank of Korea (BoK) noted that the outstanding balance of virtual currency accounts totalled about Won2tn ($1.79bn) – equivalent to around 8% of the total deposits operated by country’s brokerages, and therefore relatively small.
Comparatively small market
“The amount of crypto-asset investment is not really big, compared with other equity markets, and local financial institutions’ exposure to possible risks of digital assets is insignificant,” the BoK said.
It added: “Against this backdrop, we expect crypto-assets to have a limited impact on the South Korean financial market.”
Other notable central banks have agreed that the crypto asset market remains small compared to other financial markets and, therefore, poses little threat to overall financial stability.
Other central banks agree
Last month German authorities said crypto transactions were too low compared with the size of the global financial system to pose a serious threat. Supranational bodies, the International Monetary Fund and the Financial Stability Board (FSB) agreed.
The FSB’s Mark Carney said in March: “The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time.”
Korea’s central bank collated its data for its report as far back as December when most cryptocurrencies were undergoing a rally that took the price of bitcoin to a record high near $20,000.
SK gradually relaxing rules
South Korea – which has been one of the keenest adopters of bitcoin and its rivals – has gradually been softening its approach to cryptocurrencies in recent months. The severe price drops in January were, in part, a response to Seoul’s hard-line approach to the asset class.
Late in January the Ministry of Justice suggested it was to ban all cryptocurrency trading in the country: it got as far as banning initial coin offerings, which is expected to be relaxed.