One week after the Financial Services Commission (FSC) of South Korea said that it is “not opposed” to digital currencies, a Bank of Korea report claimed that cryptocurrencies do not pose a significant risk to the country’s financial system. The country wants to align with G20’s unified stance on digital currencies, softening its outlook in the process.
BOK Report Claims the Crypto Economy Is Too Small
South Korea brokerage houses operate a total deposit size of 26 trillion won. Of this, only 2 trillion won, which is roughly eight percent, was held as balances in digital currencies in December 2017. The prices of cryptocurrencies reached an all-time high in the same month, leaving the room open for speculation about its future in the Korean financial markets.
The Bank of Korea report that highlighted these figures does not identify the crypto economy as a threat. The report stated:
“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. Against this backdrop, we expect crypto-assets to have a limited impact on the South Korean financial market.”
Are Korean Authorities Finally Coming to Terms With Crypto?
Just a week before the report’s release, the FSC hinted that it would follow the “unified” international rules for digital currencies set by the G20. The deadline for draft regulations is set in July.
The Korean authorities have been cracking down on crypto activities since the beginning of the year, making real-name transactions at exchanges compulsory. They have also raided the offices of several crypto exchanges.
News Asia reported, in late June, that the government is planning to raise 230 billion won to invest in blockchain technology. The initiative will be led by the Korean Ministry of Science and ICT as part of their blockchain technology development strategy. The investment will help over 100 organizations and 10,000 individuals. The government will also assist in the development of Blockchain-as-a-Service.
The country’s newfound interest in the technology could be fueled by a survey conducted by the Institute for Information and Communications Technology Promotion (IITP), which is a government entity related to ICT research and development.
The report suggested that Europe’s blockchain and quantum communication technology competitiveness score was 96% compared to the U.S. South Korea’s score was just 76.4% of the US, indicating the country’s blockchain tech is still 2.4 years behind. Japan and China also were ahead of Korea with 84.8% and 78.9% scores respectively.