February 25, 2024

South Korea is following in the footsteps of the United States, with the Asian country announcing a hike in interest rates in 2022. According to reports, the Governor of the country’s top financial regulator, Lee Ju-Yeol, has indicated a possible hike following the nation’s improving economic climate.

Last December, the U.S. Fed announced a proposed increase in interest rates in 2022. The regulator intends to raise the rates on three separate occasions, starting from March. South Korea is reportedly towing the same path after increasing the base rate twice in 2021. 

The news didn’t reflect positively in the gold market, as the price of the precious metal dropped to its lowest level in a long time. As a result, investors are looking elsewhere for long-term gains. The crypto market has been identified as the best alternative. 

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Virtual Currencies Have Become Prominent Investment Vehicles

Since the emergence of BTC in late 2009, cryptocurrencies have become dominant in the financial world. Although they were initially created to ease traffic in the traditional financial space and facilitate transactions and cross-border payments, they have become a popular store of value, like gold. 

As the Bank of Korea has indicated intentions to ease its monetary policy, investors will be banking on digital assets for the long-term. Responding to the news, a banker said that while he can’t agree that cryptocurrencies are better than the precious metal, it can become as big as stocks if they become more adopted and record massive inflow. 

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Investments Enquiry Into Digital Assets Have Increased Significantly

It’s also been reported that investors are more inquisitive to know more about digital asset investments. According to financial adviser Kim Hee-Jeong, investment inquiries have increased massively despite the government’s stance on digital currencies. 

South Korea has a policy that prohibits banks from investing or dealing in cryptos. In fact, digital assets aren’t included in portfolios of bank customers due to their volatilities. Hee-Jeong noted that crypto investments are no longer associated with Gen Z, as the elderly are also making inquiries about them. 

Like last year, entities are investing in virtual coins in South Korea this year. Since the start of 2021, local securities firms have been publishing reports about digital assets. This suggests that companies are embracing the idea of integrating this asset class to their portfolios. 

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The growing popularity of the cryptocurrency market has created a new portfolio and a framework for institutions. According to Choi Hyun-man of Mirae Asset Securities, blockchain and NFTs have created new business opportunities. 

Institutions looking to add crypto to their portfolios could have issues with the country’s tough crypto regulations. South Korea introduced taxation for the industry and asked prominent app stores Google and Apple to intercept blockchain games, also known as P2E games. 


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