Leveraged crypto trading threatens banking system, says Korea central bank governor

Cryptocurrency • May 27, 2021, 12:59PM EDT
Chintung Lee/ shutterstock.com

Bank of Korea Governor Lee Ju-yeol has said that leveraged cryptocurrency trading threatens the country's banking and financial system.

Speaking at a press conference on Thursday, Lee said that "an excessive level of leveraged cryptocurrency trading puts households at risk of financial damages considering the instability of (cryptocurrency)," as reported by the Korea Herald.

"We expect (the increasing amount of crypto trading) to have a negative impact on the financial system in any respect," said Lee.

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Leveraged trading involves trading with the borrowed amount. If more borrowers default on payments, it could negatively affect a country's banking system.

Lee reportedly pledged to closely monitor the financial transactions of Korean banks and other financial institutions associated with leveraged crypto trading, hinting at possible measures to curtail new loans.

South Korean crypto exchanges are currently already on a deadline to win business licenses. They need to partner with local banks by September 24 to open real-name bank accounts for customers. But banks are reportedly concerned that this could leave them liable for any crypto money laundering.

While bigger exchanges such as Upbit, Bithumb, Korbit, and Coinone could meet the requirements, smaller exchanges in the country could reportedly shut down.

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Yogita Khatri is a senior reporter at The Block, covering all things crypto. As one of the earliest team members, Yogita has played a pivotal role in breaking numerous stories, exclusives and scoops. With nearly 3,000 articles under her belt, Yogita holds the records as The Block's most-published and most-read author of all time. Prior to joining The Block, Yogita worked at crypto publication CoinDesk and The Economic Times, where she wrote on personal finance. To contact her, email: [email protected]. For her latest work, follow her on X @Yogita_Khatri5.