Bank of Korea: The institutionalization of virtual assets will strengthen their connection with financial markets, and spillover effects need to be ma...

According to Odaily Odaily, the Bank of Korea stated in its second-half Financial Stability Report released on December 23 that the correlation between virtual assets and traditional financial markets is increasing as the global virtual asset market becomes more institutionalized. The report analyzes that driven by factors such as increased participation from institutional investors and the launch of spot ETFs, the synchronicity between virtual asset price fluctuations and the stock market is becoming increasingly significant. Spillover effect analysis shows that shocks from the virtual asset market can affect traditional financial markets, especially during periods of macroeconomic shocks or monetary policy shifts.

The report argues that due to the ban on corporate participation and restrictions on the issuance of financial products, the spillover effects in South Korea are currently at a low level, and the market structure remains dominated by individual investors. However, the Bank of Korea points out that if South Korea promotes the institutionalization of virtual assets in the future, the connection between virtual assets and traditional financial markets will expand, forming a shock transmission path. Therefore, during the institutionalization process, it is essential to establish a system capable of managing the potential risks brought about by synchronization within an acceptable level.