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

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27 May 2021

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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