South Korea’s central bank has begun its inaugural systematic examination of how traditional financial institutions are entering the virtual asset sector and the vulnerabilities this creates for the broader financial system.
The Bank of Korea started circulating a questionnaire titled “Survey on Financial Institutions’ Entry into the Virtual Asset Market” on October 23, targeting 18 banks and 13 brokerages.
The banks include the country’s five largest lenders: KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup.
This marks the first time the central bank has conducted such a targeted inquiry into traditional finance’s growing footprint in digital assets.
The questionnaire seeks granular information on each firm’s organizational setup and budget allocations dedicated to virtual assets, the current stage of any market-entry activities along with future plans, the main motivations driving their involvement, and the scale of investments made in both domestic and overseas companies active in the crypto space.
It also requests details on existing risk assessments related to these activities and the risk management frameworks already in place.
In addition to mapping operational footprints, the survey poses concrete stress scenarios designed to gauge potential spillover effects.
One asks institutions to evaluate the consequences if South Korea’s largest crypto exchange by market share were forced to halt operations temporarily because of a major hacking incident or comparable disruption.
Another explores the impact of a sharp decline in prices of assets such as Bitcoin followed by an extended period of weak trading volumes.
A third scenario examines the possible effects on the surveyed firms if a different financial institution incurred substantial losses tied to virtual asset activities, highlighting contagion concerns.
The exercise is intended to generate internal reference material for the central bank as policymakers continue efforts to integrate virtual assets more fully into the formal regulatory architecture.
Officials have noted that banks and brokerages are advancing their own preparations even while comprehensive legislation has progressed more slowly than many in the industry anticipated.
The goal is to establish a clear baseline of current activity and to identify emerging risks before they become more pronounced.
Existing supervisory reporting to the Financial Supervisory Service provides limited visibility into virtual asset-related operations, prompting the Bank of Korea to gather this baseline data directly.
The review occurs against a backdrop of closer observed ties between digital asset markets and conventional financial markets.
In its Financial Stability Report issued in June, the central bank observed that correlations between crypto and equity markets intensified during periods of elevated stress—such as the early COVID-19 period in 2020 and the global interest-rate increases of 2022—and have remained elevated relative to historical norms since the introduction of spot Bitcoin exchange-traded funds in the United States in 2024.
Earlier analysis by the Bank of Korea has also flagged potential transmission channels from stablecoins, including heightened short-term rate volatility and the risk of runs that could link virtual and traditional markets.
Although the survey was launched before a recent large-scale hack at the world’s biggest crypto exchange, that incident has underscored the kinds of operational and market shocks the central bank is seeking to understand.
By collecting this information now, the Bank of Korea aims to better anticipate how expanding institutional participation could amplify or transmit crypto-related risks into the core financial system.
