The Korea Institute of Finance argues that the influence of crypto may be a major hinderence to the stability of the Korean economy
The Korea Institute of Finance or KIF has released a report that focuses on the growing adoption of crypto assets in South Korea. The report states that adoption of crypto could make the economy and financial system of South Korea “unstable”
A senior researcher Lee Dai-gi made the suggestion that the increasing amount of firms making investments into volatile crypto could be dangerous as those firms could experience a loss in profit, these losses may lead to “ deterioration of asset quality” and thus damage the reputation of the firm.
The influence of crypto is not slated to slow down in South Korea as there are over 5 million users of crypto or crypto related services since 2021. South Korea also just elected its first pro-crypto President Yook Suk-yeol this past March. The researchers also stated that with all of these new crypto services and projects there are indeed security issues as there has been an increase in the number of crypto-related crimes and shady protocols such as Tornado Cash.
“Considering the increasing number of related crimes, virtual assets may emerge as a major threat to financial stability” the report stated.
The regulatory agencies of Korea are in the process of creating regulations for crypto but do not want to affect the growing crypto market. Currently there is one form of regulation that is under review. The FSC or Financial Services Commission announced plans to roll out a digital securities market place which would be operated by the Korean Exchange or KRX which is one of the stock exchanges in the country. The assets on the KRX would most likely be monitored via STOs (security tokens) using blockchain technology.
The incorporation of the assets onto KRX is very important to the development of the market ,protections for investors, and market stability.
Crypto has had a volatile start in South Korea but the public has made it clear they are in support of crypto with the election of the new crypto-friendly president. President Yoon spoke on crypto and regulation in a speech about the financial future of the country.
“To realize the unlimited potential of the virtual asset market, we must overhaul regulations that are far from reality and unreasonable”
South Korea is the home of Do Kwon and regulators were quick to action during The demise of the LUNA token. The goal is to make sure there are no more losses like those of the Terra debacle.