Most banks have been skeptical of investing in the wave of cryptocurrencies. But South Korean banks seem to be braving this storm. With about $2 billion’ worth of cryptocurrency investments, South Korean banks are emerging as the largest crypto holders of their country. A report by Yonhap (S. Korean media agency) had estimated the Korean banks’ investment in digital currency is around $1.79 billion by December 2017. This report also prospected it to be rising within the year.
Korean Banks Competing Against Cryptocurrency Exchange
Then again, this huge figure does not come as a surprise. The Korean banks have been competing with a local cryptocurrency exchange company known as Bithumb to gain a foothold in the digital currency market. Some of the banks opted to offer free vault services but charged a commission on their clients’ withdrawals. As a result, this shifted the popularity of the currencies’ trading from that of agencies to that of banks. This move resulted in a shift of popularity from the agency to the banks. An earlier report by Yonhap had indicated that as early as January 2017, banks were reaping huge profits as the income from the service grew by about 36 times.
Whereas this rise of banks could sound like great news to many, it directly threatens traditionally established businesslike the Bithumb. In fact, at the moment, the banks have overtaken the popularity of Bithumb in the market. Whereas banks are now estimated to be trading at $2 billion, Bithumb’s market share has dropped from $6 billion to nearly $1 billion.
It is a common trend by governments to ban industries that bubble in their incomes; subsidize the diminishing or growing industries and tax the established industries. In the case of crypto adoption in S. Korea, all these have been applied or suggested to be employed at some point by the S. Korean government. At the moment, there is a clear indication that the government has resorted to incorporate and recognize the digital currency eventually.
The green light of the digital money success in Korea was shown through a move by the Korean government that aims to lift their ban on ICO. This step was followed by a lengthy study that was aimed at developing a framework or means of establishing the adoption of the digital bucks in the country. Not long ago, the S. Korean congress drafted a bill that aimed at recognizing cryptocurrency as a legitimate source of income. This proposed draft by the government seeks to standardize cryptocurrencies and to develop a framework for identifying workers within the blockchain industry of the country.
The Present State Of Cryptocurrencies In Korea
At the moment, most banks in Korea remain optimistic about investing in the digital currency platforms. Even though a significant share of traditional banks’ gains are drawn from traditional ways of investing like bonds and stocks, there seems to be a notable enthusiasm by the organizations to adopt the new venture. The current extent of cryptocurrency adoption cannot be estimated. However, with some of the leading banking players like Shinhan passing the currency and sponsoring experiments revolving along the digital currency, there is a high probability of this trend getting adopted by other players.
Nevertheless, the move by banks to venture into investing in virtual currency has also been met by formidable obstacles. For instance, whereas commercial banks would like to tap into more income through deducting charges on transactions done via the digital currency networks, the same banks are to ensure that they limit their investments in the virtual currency to retain the stability of the nation. It is hard to predict how other banks will react to the oncoming wave of digital currencies, but at the moment, a keen eye on S. Korea could help to predict where the traditional sector might be heading.