The South Korean government has, for the first time, officially collected and disclosed data on the total amount of fiat currency deposits held by domestic cryptocurrency exchanges. The figures reveal a staggering 64-fold increase compared to the previous year, with the total exceeding 2 trillion Korean Won.
Total Deposits Exceed 2 Trillion Won
At the start of the year, the Financial Supervisory Service (FSS) of South Korea announced the official fiat currency deposit figures for cryptocurrency exchanges for 2017.
The data showed that the deposit balance as of December 12, 2017, stood at 2.067 trillion Won (approximately $1.9 billion USD). This represents a massive surge from the 32.2 billion Won (approx. $30.3 million USD) recorded at the end of 2016, marking a 64-fold increase. This also constitutes the first officially confirmed data regarding the total deposit size of the virtual currency market in the country.
Furthermore, the FSS also released comparative figures for previous years. The deposit amounts for 2014 and 2015 were 2.5 billion Won (approx. $2.35 million USD) and 9 billion Won (approx. $8.46 million USD), respectively, highlighting the explosive growth trend.
Capital Inflow: State-Owned Banks vs. Commercial Banks
A detailed breakdown of the data indicates the primary channels for this capital inflow. In the past year, approximately 1.4 trillion Won flowed into cryptocurrency exchanges through state-owned banks. A key example is the Industrial Bank of Korea (IBK), the country's third-largest state-owned bank.
Conversely, around 743 billion Won was channeled through commercial banking institutions.
The report also notes that most of South Korea's major cryptocurrency exchanges primarily utilize commercial banks for their operations. For instance, Bithumb uses the National Agricultural Cooperative Federation (Nonghyup) Bank and Shinhan Bank, while Coinone also uses Nonghyup Bank. Kobit operates primarily through Shinhan Bank.
There are notable exceptions to this trend. Upbit, which has emerged as the exchange with the largest daily trading volume, utilizes the state-owned Industrial Bank of Korea (IBK).
Regulatory Response and Legislative Action
The rapid growth in deposits has accelerated calls for regulatory clarity and oversight. South Korean lawmakers appear to be moving quickly in response to this burgeoning market.
Park Yong-jin, a member of the Democratic Party and the National Assembly of South Korea, has been actively reviewing the acquired data. He emphasized the associated risks, stating, "If the overheating of virtual currency speculation begins to impact the fiat currency system, the risk of asset losses will increase significantly."
He further added, "The National Assembly and financial authorities are strengthening communication for management and supervision. We must accelerate our efforts to establish a proper framework."
In a significant move earlier in August, Representative Park had submitted a proposal to the National Assembly to amend the Electronic Financial Transactions Act. The proposed amendments aimed to establish a clear regulatory framework for cryptocurrencies like Bitcoin. However, this specific bill has not yet been formally adopted into law.
The dramatic influx of capital underscores the massive and growing interest in digital assets among South Korean investors. This trend presents both significant opportunities and complex challenges for financial regulators tasked with ensuring market stability and protecting consumers. For those looking to understand the global context of this growth, you can explore more international market strategies.
Frequently Asked Questions
What was the main reason for disclosing this deposit data?
The Financial Supervisory Service released the data to provide official, transparent insight into the scale of the cryptocurrency market in South Korea, which had previously been estimated. This move is part of broader efforts to understand and regulate the rapidly growing sector.
Which type of bank handled more crypto exchange deposits?
State-owned banks handled a larger share of the total fiat deposits, with approximately 1.4 trillion Won flowing through them. Commercial banks accounted for a significant but smaller portion, processing around 743 billion Won.
Are South Korean lawmakers actively working on crypto regulation?
Yes, there is active legislative discussion. A proposal to amend the Electronic Financial Transactions Act was submitted to create a regulatory framework for cryptocurrencies. While the specific bill is still under review, the rapid market growth has increased the urgency for clear regulations.
What is the primary concern for regulators regarding crypto deposits?
The major concern is systemic risk. Authorities are worried that if cryptocurrency speculation overheats, it could potentially impact the stability of the traditional fiat currency system and lead to substantial financial losses for investors.
Which exchange uses a state-owned bank?
Upbit, one of the largest exchanges by daily trading volume, uses the state-owned Industrial Bank of Korea (IBK). Most other major exchanges primarily partner with commercial banks.
How does this growth compare to previous years?
The growth has been exponential. The 2017 year-end deposit figure was 64 times larger than that of 2016. The data from 2014 and 2015 further illustrate the market's rapid expansion from a much smaller base.