BANK OF KOREA WANTS TO MONITOR CRYPTO TRADING ACTIVITY, CITES MONETARY RISKS

Last updated: June 19, 2025, 21:53 | Written by: Laura Shin

The world of cryptocurrency, with its promise of decentralization and financial innovation, has captivated millions, including a significant number in South Korea.However, the rapid growth and inherent volatility of digital assets have also raised concerns among financial regulators worldwide. Bank of Korea rejects Bitcoin as a reserve asset, citing volatility IMF rules, while easing crypto regulations for institutional trading.Now, the Bank of Korea (BOK), the nation's central bank, is taking a proactive stance, seeking enhanced powers to monitor cryptocurrency trading activity, fearing potential risks to the country's financial stability and monetary policy. South Korea s central bank is the latest entity seeking powers to monitor crypto trading activity in the country. The Bank of Korea reportedly has plans to maintain strict oversight on cryptoThis move comes amidst ongoing debates within South Korea regarding the role of cryptocurrencies, with some lawmakers even exploring their potential as strategic reserve assets. The Bank of Korea reportedly has plans to maintain strict oversight on crypto trading activity via real-name bank accounts. According to a report by The Korea Herald on Thursday, the BOK is seeking authority under Article 87 of the country s central bank Act, stating: We plan to utilize our legal authority over requesting document submittal from financial institutions to monitor theThe BOK, however, remains wary, citing volatility, high transaction costs, and non-compliance with international standards as key reasons for its reluctance to embrace digital currencies like Bitcoin as official reserves. Bank of Korea wants to monitor crypto trading activity, cites monetary risksThe central bank's concerns stem from the sheer volume of crypto trading and the potential for widespread financial instability should a significant market downturn occur. The Bank of Korea has ruled out the inclusion of Bitcoin in its foreign exchange reserves, citing concerns over the crypto's price volatility. In response to a March 16 inquiry from Representative Cha Gyu-geun of the National Assembly s Planning and Finance Committee, the central bank pointed out the risks of Bitcoin s price fluctuationsThe BOK aims to leverage its existing legal authority to request data from financial institutions, effectively keeping a closer watch on crypto-related transactions. The central bank governor has pledged to monitor transactions of Korea's financial institutions associated with leveraged crypto trading. By Jamie Crawley Updated, 1:02 p.m. PublishedThis article delves into the BOK's motivations, the proposed monitoring measures, and the broader implications for the future of cryptocurrency in South Korea.

Why is the Bank of Korea Concerned About Crypto?

The Bank of Korea's concerns about cryptocurrency stem from several key factors, all related to the potential impact on the nation's financial system and monetary policy.These concerns are not unique to South Korea; many central banks globally are grappling with how to regulate and manage the risks associated with digital assets.

Volatility: The extreme price swings of cryptocurrencies, particularly Bitcoin, are a major source of worry. South Korea Cuts Out Bitcoin Strategic Reserve Considerations: Report The IMF emphasizes the importance of prudently managing liquidity, market, and credit risks criteria that bitcoin, withThe BOK views this volatility as a threat to financial stability, as sudden drops in value could lead to significant losses for investors and potentially trigger broader market instability.
Financial System Risk: The BOK fears that the widespread trading of cryptocurrencies, especially with leverage, could expose the entire South Korean financial system to undue risk. risks examines the potential negative impact to banks from cyber threats and illicit activity. The crypto-asset risks section discusses the FDIC s approach to understanding and evaluating crypto-asset-related markets and activities. The discussion of climate-related financial risks focuses on the physical risk ofA large-scale crypto crash could have cascading effects on traditional financial institutions if they are heavily involved in crypto-related activities.
Monetary Policy Challenges: Cryptocurrencies, with their decentralized nature, can complicate the implementation of monetary policy. Bank of Korea wants to monitor crypto trading activity, cites monetary risks PANews ｜ 3:41 South Korea s central bank is the latest entity seeking powers to monitor crypto trading activity in the country.If a significant portion of the population uses cryptocurrencies for transactions, it could reduce the effectiveness of the BOK's traditional tools for managing inflation and controlling the money supply.
Lack of Compliance with IMF Guidelines: The BOK has explicitly stated that Bitcoin does not meet the International Monetary Fund (IMF) guidelines for reserve assets. Bank of Korea intensifies monitoring of crypto trading to mitigate monetary risks. Learn about new regulations, real-name account mandates, and upcoming taxation policies.These guidelines emphasize stability, liquidity, and broad acceptance, qualities that Bitcoin, in the BOK's view, currently lacks.

Lee Ju-yeol's Warning: A Potential Financial Collapse

Former Bank of Korea Governor Lee Ju-yeol publicly expressed serious concerns about the potential for cryptocurrency to trigger a financial collapse. South Korean lawmakers have explored the idea of adopting cryptocurrencies as strategic reserve assets, according to local reports. However, the Bank of Korea has pushed back against the prospect of using Bitcoin as a reserve asset, citing its failure to meet the nation s foreign reserve standards.His warning highlighted the combination of high volatility and widespread participation in crypto trading as a particularly dangerous mix. 🚨MASSIVE SIGNAL: The anti-crypto era is officially ending🚨🔹BitMEX founder @CryptoHayes: Pardoned🔹Hawk Tuah Girl s token: SEC dropped the case🔹FDIC rulesThis statement underscores the BOK's perception of cryptocurrency as a systemic risk that requires careful monitoring and regulation.

The Bank of Korea's Monitoring Strategy

To address these concerns, the Bank of Korea is implementing a strategy focused on intensified monitoring of crypto trading activity.This strategy involves leveraging existing legal authority to gather data from financial institutions.

Real-Name Bank Accounts: The BOK intends to maintain strict oversight on crypto trading activity through real-name bank accounts. The proposal has raised questions about how such a hybrid system might function across jurisdictions. It s not clear how the hybrid model of tokenized deposit plus private-sector stablecoin will necessarily achieve the stated purpose of protecting monetary sovereignty, Peter Chung, head of research at Singapore-based algorithmic crypto trading firm Presto Labs, told Decrypt.This means that all crypto transactions will be linked to verified individuals, making it easier to track and identify potential risks.
Legal Authority Under Article 87: The BOK is seeking to exercise its authority under Article 87 of the country's central bank Act. Bank of Korea wants to monitor crypto trading activity, cites monetary risks . Continue reading. Join now. By becoming a patron, you'll instantly unlock access toThis article grants the BOK the power to request document submittal from financial institutions, enabling them to access information on crypto-related transactions.
Data Collection from Financial Institutions: By requesting data from banks and other financial institutions, the BOK aims to gain a comprehensive understanding of the scale and nature of crypto trading activity in South Korea. 16K subscribers in the CryptoCurrencyClassic community. The unofficial Wild Wild West of r/CryptoCurrency. CryptoCurrency Memes, News andThis data will help them identify potential risks and develop appropriate regulatory responses.

Example of Monitoring in Action

Imagine a scenario where the BOK notices a significant increase in crypto trading volume from a particular bank account.Using its authority, the BOK can request detailed information from the bank about the account holder's trading activity, including the types of cryptocurrencies traded, the size of the transactions, and the source of the funds.This information can then be used to assess the potential risks associated with the account holder's activity and to identify any suspicious or illegal behavior.

South Korea's Regulatory Landscape for Crypto

The Bank of Korea's monitoring efforts are taking place within a broader regulatory landscape for cryptocurrency in South Korea. BTCUSD Bitcoin Bank of Korea wants to monitor crypto trading activity, cites monetary risks South Korea's central bank is the latest entity seeking powers to monitor crypto trading activity in the country.While the BOK is focused on mitigating risks, other government agencies are working on developing a comprehensive framework for regulating the digital asset industry.

Upcoming Taxation Policies: South Korea is implementing taxation policies for crypto gains, aiming to bring the digital asset market in line with traditional financial markets. Monetary Policy Report Executive Summary for Monetary Policy Report (March 2025) The Bank of Korea has shifted its monetary policy stance, cutting the Base Rate by 0.75%p in total on three occasions as downward pressure on economic growth has increased amid a stabilization in inflation and a slowing trend in household debt. 2025. 03.These policies are designed to increase transparency and reduce tax evasion.
Stablecoin Regulation: The Bank of Korea is also taking a proactive role in shaping South Korea's upcoming regulatory framework for stablecoins. The Bank of Korea (BoK) has said that Bitcoin (BTC) fails to meet both national and IMF standards, making it unsuitable as a foreign reserve asset. While responding to a March 16 inquiry from Representative Cha Gyu-geun of the National Assembly s Planning and Finance Committee, the central bank noted the risks of BTC s price fluctuationsStablecoins, which are designed to maintain a stable value, pose unique risks to financial stability, and the BOK wants to ensure that they are properly regulated.
Easing Regulations for Institutional Trading (With Caution): While the BOK is cautious about widespread crypto adoption, there are signs of a more relaxed approach towards institutional trading of digital assets. The South Korean central bank expressed concern that the trading of cryptocurrency could place the entire country s financial system at risk. Bank of Korea s Lee Ju-yeol explained that due to the volatility of cryptocurrency and how many people are trading cryptocurrency, the technology could lead to a financial collapse .This suggests a recognition that institutional involvement can bring greater maturity and stability to the market, but it will likely come with strict regulatory oversight.

The Debate Over Bitcoin as a Reserve Asset

Despite the growing interest in cryptocurrency, the Bank of Korea has firmly rejected the idea of including Bitcoin in its foreign exchange reserves.This decision is based on a thorough assessment of Bitcoin's characteristics and its suitability as a reserve asset.

Volatility Concerns: The BOK cites Bitcoin's extreme price volatility as the primary reason for its rejection.Reserve assets are typically expected to maintain a stable value, and Bitcoin's price fluctuations make it unsuitable for this purpose.
High Transaction Costs: The BOK also points to Bitcoin's high transaction costs as a drawback. The Bank of Korea (BOK) has announced plans to take a more proactive role in shaping South Korea s upcoming regulatory framework for stablecoins, citing concerns about potential threats to monetary policy and financial stability.Reserve assets need to be easily and efficiently accessible, and high transaction fees can hinder this.
Non-Compliance with IMF Standards: As mentioned earlier, the BOK emphasizes that Bitcoin does not meet the IMF's guidelines for reserve assets. Record-Breaking 15.59 Million Crypto Investors in South Korea. According to Yonhap News Agency, Representative Lim Gwang-hyun of South Korea s Democratic Party (a member of the National Assembly s Finance and Planning Committee) disclosed data from the Bank of Korea. The data reveals that as of late November, the number of domestic digitalThese guidelines prioritize stability, liquidity, and broad acceptance, which Bitcoin currently lacks.

South Korea's Strategic Reserve Considerations

While the BOK remains skeptical, some South Korean lawmakers have explored the possibility of adopting cryptocurrencies as strategic reserve assets. The Cato Institute raises concerns over Fincen's new reporting regulations, signaling a threat to financial privacy. As governments tighten their grip, couldThis idea reflects a broader interest in exploring the potential benefits of digital assets, but it faces significant hurdles due to the BOK's concerns and the need for compliance with international standards.

The Impact on Crypto Investors in South Korea

The Bank of Korea's increased monitoring of crypto trading activity will likely have several implications for crypto investors in South Korea.These implications include increased scrutiny of transactions, greater transparency, and potentially stricter regulations.

Increased Scrutiny of Transactions: Investors can expect increased scrutiny of their crypto transactions, as the BOK monitors trading activity through real-name bank accounts.This could involve requests for additional information about the source of funds and the purpose of the transactions.
Greater Transparency: The focus on real-name accounts will increase transparency in the crypto market, making it more difficult for individuals to engage in illicit activities.This could lead to a more regulated and mature market in the long run.
Potential for Stricter Regulations: The BOK's monitoring efforts could pave the way for stricter regulations on crypto trading, such as limits on leverage and enhanced KYC/AML requirements (Know Your Customer/Anti-Money Laundering).

Advice for Crypto Investors in South Korea

Here's some practical advice for crypto investors in South Korea, given the BOK's increased monitoring and the evolving regulatory landscape:

Use Reputable Exchanges: Only use reputable crypto exchanges that comply with South Korean regulations and have robust security measures in place.
Maintain Accurate Records: Keep accurate records of all your crypto transactions for tax purposes.
Be Aware of KYC/AML Requirements: Be prepared to provide identification and other information to comply with KYC/AML requirements.
Stay Informed About Regulations: Stay informed about the latest regulations and guidelines related to crypto trading in South Korea.
Manage Your Risk: Understand the risks associated with crypto trading and manage your investments accordingly.Do not invest more than you can afford to lose.

Global Perspectives on Crypto Regulation

The Bank of Korea's approach to crypto regulation is part of a broader global trend. The Bank of Korea (BOK) has officially ruled out Bitcoin as a reserve asset, citing concerns over its extreme volatility, high transaction costs, and non-compliance with International Monetary Fund (IMF) guidelines.Central banks and financial regulators around the world are grappling with the challenges and opportunities presented by digital assets.Different countries are taking different approaches, ranging from outright bans to more permissive regulatory frameworks.

The European Union's MiCA Regulation: The EU's Markets in Crypto-Assets (MiCA) regulation is a comprehensive framework for regulating the crypto market in Europe.It aims to provide legal clarity and protect consumers.
The United States' Regulatory Approach: The US regulatory landscape for crypto is still evolving, with different agencies taking different approaches.The Securities and Exchange Commission (SEC) has been particularly active in pursuing enforcement actions against crypto companies.
China's Crypto Ban: China has taken the most restrictive approach, banning all crypto trading and mining activities.

Lessons Learned From Other Jurisdictions

The Bank of Korea can learn valuable lessons from the experiences of other countries in regulating crypto.These lessons include the importance of a clear and consistent regulatory framework, the need for international cooperation, and the importance of protecting consumers while fostering innovation.

The Future of Crypto in South Korea

The future of cryptocurrency in South Korea remains uncertain, but the Bank of Korea's increased monitoring efforts suggest a cautious and proactive approach to regulation. Bank of Korea wants to monitor crypto trading activity, cites monetary risks bankofkorea centralbank cryptoexchangesWhile the BOK is unlikely to embrace Bitcoin as a reserve asset anytime soon, it is also unlikely to ban crypto altogether. Leader in cryptocurrency, Bitcoin, Ethereum, XRP, blockchain, DeFi, digital finance and Web 3.0 news with analysis, video and live price updates.A more likely scenario is a gradual evolution towards a more regulated and mature crypto market, with stricter oversight and greater transparency.

Potential Scenarios for the Future

Increased Regulation: We can expect to see more regulations on crypto trading, including stricter KYC/AML requirements, limits on leverage, and enhanced consumer protection measures.
Institutional Adoption: Institutional investors may become more involved in the crypto market, bringing greater stability and maturity.However, this will likely be accompanied by strict regulatory oversight.
Innovation in Blockchain Technology: Despite the regulatory challenges, South Korea is likely to remain a hub for innovation in blockchain technology.The country has a vibrant tech sector and a strong interest in exploring the potential of digital assets.

Conclusion: Key Takeaways on the Bank of Korea's Crypto Monitoring

The Bank of Korea's decision to intensify its monitoring of crypto trading activity reflects growing concerns about the potential risks to financial stability and monetary policy.While some lawmakers have explored the possibility of using cryptocurrencies as strategic reserve assets, the BOK remains skeptical, citing volatility, high transaction costs, and non-compliance with international standards.The BOK's strategy involves leveraging its existing legal authority to gather data from financial institutions, focusing on real-name bank accounts to track and identify potential risks.This increased scrutiny will likely lead to greater transparency and potentially stricter regulations for crypto investors in South Korea.The future of crypto in South Korea will depend on the balance between fostering innovation and mitigating risks, a balance that the BOK is actively seeking to achieve.Ultimately, the BOK's actions signal a commitment to safeguarding the nation's financial system amidst the ongoing evolution of the digital asset landscape.As the crypto market continues to evolve, both investors and regulators need to stay informed and adapt to the changing environment. Key takeaways include increased scrutiny of crypto transactions, the BOK's commitment to financial stability, and the ongoing debate about the role of crypto in South Korea's financial future. Stay informed, trade responsibly, and always do your own research.