The cryptocurrency risk for South Korea’s market is muted as the total amount of digital coin investments was relatively low in 2017, the Bank of Korea (BOK) said in a report released last Friday.
“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,” BOK said as quoted by local news provider Yonhap Agency.
According to the report, the outstanding balance of cryptocurrency accounts in domestic banks was 2 trillion won ($1.79 billion) as of December last year. This sum is deemed low because it represents only 8% of all deposits in local brokerage houses.
“Against this backdrop, we expect crypto-assets to have a limited impact on the South Korean financial market,” the central bank added.
South Korea virtual currency trading grew significantly last year. The Asian country accounted for about 12% of crypto trading volumes globally, Citi estimated in December 2017, when digital coins recorded a massive price increase.
“Bitcoin is now so popular that it has potentially started to drain retail liquidity away from the largest stocks,” Citi analysts explained.
New crypto rules
On Tuesday (July 10), Korea will start enforcing the revised anti-money laundering bank rules on cryptocurrency settlement as laid down by the Financial Service Commission (FSC). Banks and other financial institutions will be obliged to expand due diligence procedures for cryptocurrency exchanges to their non-client accounts, to share information about overseas digital trading platforms with the FSC, and to halt immediately suspicious cryptocurrency transactions.
Last week, South Korea’s government released a new classification system for the crypto and blockchain industry, in line with G20 intentions for a common approach to virtual assets. The classification has ten categories, including blockchain system, decentralized application, and cryptocurrency exchange.