South Korean economists see cryptocurrencies as a threat to the financial system

Employees of the Korean Institute of Finance (KIF) studied the development of cryptocurrencies in the country and came to the conclusion that their impact on the traditional economy is approaching a critical level.

KIF posted a report stating that the digital currency could pose a serious threat to the stability of the economy. The institute’s specialists argue that the growing adoption of cryptocurrencies in South Korea could make the traditional financial system unstable.

KIF Senior Fellow Lee Dai-gi, one of the authors of the report, suggested that the growing number of companies investing in volatile crypto assets could face a loss of profits. Which in turn can lead to “deterioration in asset quality” and damage the reputation of these companies. Lee acknowledged that the impact of cryptocurrencies in South Korea is “still marginal.”

The researcher believes that the rate at which the industry has been growing in the country since 2019 indicates that “the influence of digital assets is expected to increase” in the financial system, and that it will continue to grow.

“Given the growing number of crimes associated with digital currencies, virtual assets can become a serious threat to financial stability,” emphasize the employees of the Korea Institute of Finance.

In July, South Korean authorities reported that law enforcement was investigating cases of illegal bitcoin trading aimed at obtaining the so-called kimchi premium. As a result of the investigation last month, law enforcement arrested 16 people who received income from this so-called bonus. In August, the South Korean Financial Services Commission (FSC) accused 16 foreign cryptocurrency exchanges of violating local laws and providing digital asset trading services to Korean citizens.