Bank of Korea surveys 31 firms on crypto risk exposure

The Bank of Korea began surveying 18 banks and 13 brokerages on October 23 as part of its first reported review of financial institutions' participation in the virtual asset market. The central bank asked these institutions about cryptocurrency-related risks, including the effects of a major exchange hack, a market crash, or heavy losses at another financial institution. One scenario in the survey asks how financial firms would be affected if South Korea's largest crypto exchange by market share temporarily suspended operations following a major hack or similar incident. Other questions address a steep fall in cryptocurrency prices followed by a sustained trading slump and potential fallout from another financial institution suffering heavy losses from a crypto-related incident.

The survey includes questions about each institution's crypto-related staffing, budgets, business activities, reasons for entering the market, and amounts invested in domestic and overseas crypto companies. Responses to the Bank of Korea survey are reportedly due on Wednesday. The survey began before last week's $6.3 billion Binance hack, which US authorities attributed to North Korean hackers. KB Financial Group completed a won-denominated stablecoin pilot in May. Kakao Pay and KakaoBank partnered with Fireblocks in September to explore digital asset infrastructure.

The Bank of Korea has pushed for bank-led stablecoin issuance while disagreements over which institutions should be permitted to issue stablecoins have complicated progress on the proposed Digital Asset Basic Act. A Bank of Korea official told The Korea Herald that financial institutions are making their own preparations even as virtual asset legislation is moving more slowly than the market expected. In October, the Financial Services Commission proposed tougher security requirements after finding deficiencies at 130 of 555 financial companies. The Financial Services Commission's proposals include more frequent vulnerability assessments and greater executive accountability following security incidents involving 16 companies, including crypto exchanges.