Bank of Korea: Bankruptcies for South Korean crypto platforms are unlikely
- The Bank of Korea said that bankruptcies in the local cryptocurrency market are unlikely.
- The Bank of Korea highlights strict regulations and the absence of ICOs as factors that reduce the likelihood of this happening.
- The report identifies failures in price stability and unsustainable business models.
In a recent report assessing crypto-asset market loopholes and their implications, the Bank of Korea (BOK) argued that incidents such as bankruptcies of trading platforms and loans in the domestic crypto-asset market are unlikely to occur in the country.
The Bank of Korea noted that the local crypto-asset ecosystem mainly consists of exchanges focused on simple business brokerage due to strict regulations, including a ban on initial coin offerings (ICOs). Thus, it confirms that the probability of encountering events similar to those of the global cryptocurrency market is still low.
However, the major Korean bank stressed the need to prepare for potential risks in the cryptocurrency market, advising caution and preparation for unforeseen circumstances.
The report chronicled global incidents such as the sharp decline of the US dollar (UST) algorithmic stablecoin, native token LUNA, and the bankruptcies of Celsius, a crypto-asset lending platform, and FTX, a crypto-asset exchange.
Furthermore, the Bank of Korea identified failures in price-fixing systems, unsustainable business models that rely on continuous injection of capital, asset and debt maturity mismatches, liquidity management failures, opaque insider transactions, and transfer of customer deposits as reasons for these incidents.
The report emphasized that Korea’s current regulatory framework, which prohibits ICOs and requires separation of customer deposits from private assets, makes it difficult to replicate situations like those experienced by Celsius and FTX.
It is worth noting that coins issued by local exchanges abroad cannot be listed on their own exchanges. The Bank of Korea concluded that supporting self-issuing coins, similar to FTT’s FTX, and price manipulation through affiliated entities such as Alameda is unlikely in the Korean context.
While the risks associated with crypto assets are low, the Bank of Khartoum advised setting up a comprehensive response system to prepare for potential threats.
The post BOK: Bankruptcies Likely for South Korean Crypto Platforms appeared for the first time in Coin Edition.