Bank of Korea Calls for Tight Surveillance to Tackle ‘Kimchi Premium’ in Crypto Markets
The Bank of Korea officials have raised concerns regarding the possible resurfacing of ‘Kimchi Premium,’ a difference in cryptocurrency prices in the South Korean exchanges vis-à-vis foreign exchanges. Per a report by Yonhap News, on September 11, 2018, the BOK has tightened its strings around this price differential asking for closer surveillance.
Fears of Kimchi Rise
The central bank of Korea had cautioned the investors of a possible repeat of early 2018 like the situation when cryptocurrencies such as bitcoin and ether were being traded in the local South Korean market for prices much higher than the global markets.
This price difference was caused due to a speculative investment sentiment and an exorbitant increase in the demand for cryptocurrencies in a short span of time.
However, due to the government’s ban on anonymous trading and initiation of other such protective measures, ‘kimchi premium’ has been almost wiped out of the Korean market.
In its report, the Bank of Korea stated, “Price gaps between domestic and overseas cryptographic assets have occurred repeatedly, and technical and institutional factors that negatively affect smooth capital flows are difficult to be resolved in the short term.”
BTCManager reported on August 2, 2018, that the “Kimchi Premium” was responsible for digital assets to trade at 600 percent premium in local South Korean crypto exchanges compared to their global counterparts.
The Bank of Korea stressed the possible side effects of such an economic phenomenon.
Variance in cryptocurrency prices could result in malicious actions such as illegal foreign exchange transactions, thus prompting the BOK to up the ante and call for continuous monitoring of such a market behavior.
The bank is also raising awareness among the public to not go overboard on crypto investments on a “false hope of a price increase.”
Fear of Missing Out
Nonchalantly called ‘FOMO’ in the crypto world, the fear of missing out on significant gains often drives investors to jump the shark. However, this often proves to be a double-edged sword for the investors as they lose out on their money in the hopes of becoming millionaires overnight.
Keeping the investor behavior in mind, it makes sense to practice due diligence and cautiousness before investing money in the volatile digital currencies market.
South Korea has put itself as one of the global pioneers of cryptocurrencies, as the country has made quite a stride in the cryptosphere.
BTCManager reported on July 23, 2018, that the South Korean Regulators had established an exclusive cryptocurrency department for policymaking.