Bank of Korea Sees Threat to Financial System in Leveraged Crypto Trading

The central bank governor has pledged to monitor transactions of Korea's financial institutions associated with leveraged crypto trading.

May 27, 2021 at 8:34 a.m. UTC
Updated Sep 14, 2021 at 1:02 p.m. UTC

The governor of South Korea's central bank said leveraged crypto trading threatens the country's financial system, the Korea Herald reported.

  • “An excessive level of leveraged cryptocurrency trading puts households at risk of financial damages considering the instability of [cryptocurrency],” Bank of Korea Gov. Lee Ju-yeol said Thursday.
  • “We expect [the increasing amount of crypto trading] to have a negative impact on the financial system in any respect."
  • Lee pledged to monitor the monetary transactions of Korea's financial institutions associated with leveraged crypto trading, suggesting new loans may be curtailed to prevent defaults that could have a knock-on effect on the country's banking system, according to the Korea Herald.
  • Korea's central bank is already seeking the authority to monitor cryptocurrency transactions made through individuals' bank accounts.
  • That measure could be brought in as early as September, which is also the deadline for crypto exchanges to register as virtual asset service providers, a requirement that would enable the state to determine the legality of their operations in order to crack down on money laundering and fraud.

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