South Korea to Regularly Inspect Crypto Risks With New Monitoring Tools

South Korea’s financial regulator is developing new tools to regularly monitor crypto risks. The regulator warned that while the impact of the crypto market on the traditional financial system is still low, the risks posed by crypto to the country’s financial stability could increase sharply in the future.

South Korea’s Financial Supervisory Service (FSS) is planning to develop crypto monitoring tools and regularly inspect the risks associated with crypto assets, FSS Governor Lee Bok-hyun reportedly revealed Monday at a conference on the interconnectedness between the crypto market and the traditional financial market. He was quoted by local media as saying:

The Financial Supervisory Service is planning various initiatives for the risk management of the virtual asset market this year.

Regarding the crypto monitoring tools, Lee explained that the supervisory authority currently lacks data to identify potential risks from crypto even though the interconnection between the crypto market and the traditional financial market is expected to increase.

“In order to preemptively respond to risks in the virtual asset market, securing data is more important than anything else,” the FSS chief stressed. In addition, Lee said the regulator plans to establish new crypto-related disclosure obligations.

The FSS governor noted that no domestic financial company directly provides crypto-related services, adding:

Despite the growth of the virtual asset market, the direct impact on the stability of the financial system is still low.

However, should the size of the domestic crypto market expand significantly, its impact on financial stability could increase sharply, Lee cautioned.

Regulators worldwide have warned that the interconnectedness between the traditional financial market and the crypto market is increasing. The FSS chief pointed out that a number of countries are “introducing full-fledged regulatory measures for stablecoins” following the collapse of the Terra-luna ecosystem.

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