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South Korean stock markets have been imposed more radically than investor fervent digital money this month, following newly elected President Lee Jae-Myung’s pledge to allow crypto assets backed by domestic currency.
Stocks that have been involved in Bank of Korea’s digital currency projects, including Kakao Pay and LG CNS, are riding wild. Cacao more than doubled this month, with LG CNS rising nearly 70%, and profiting this week by making profits.
Kosdaq’s junior market saw stakes in fintech security company Aton increase by 80%, mobile game producer Me2on tripled, and a subsidiary recently launched Stablecoin, a dollar page for casino games.
A wave of retail enthusiasm for the possibility of issuing WON-based Stablecoins, along with shareholder-friendly policy expectations from the new government, helped increase almost 30% of this year’s benchmark Kospi Composite Index to nearly four years. Korea also became the best-performing market in Asia in the first half of the year.
Market Rally encourages retail investors to increase leverage to chase profits, with outstanding margin loans rising to Win20.5TN ($15 billion), according to data from the Korea Financial Investment Association.
The popularity of stocks, which are considered to be possible to benefit from winner-based stubcoin, arises, despite the government not yet releasing details on its cryptocurrency policy.
It was hoped by the appointment of Kim Yongbeom’s Lee, a longtime digital token defender, as its chief policy advisor, and the parliamentary bill proposed by the control party this month to promote the country’s digital asset industry.
The bill will allow companies with just 500mn of share capital to issue WON-based Stablecoins. The movement that critics warn can open up floods, open up to under-capital players, and pose systemic risks.
Korea is one of the world’s most vibrant crypto markets, with about a fifth of the country’s population trading digital assets. The stubcoin deal, awarded in the US dollar in the country, hit WON57TN in the first three months of the year, putting pressure on the Bank of Korea to accelerate preparations to issue its own digital currency.
The government has not yet decided on issuers and timing, but banks, brokerages and fintech companies have shown strong interest in entering the business.
“We want to do business, but we’re keeping an eye on where governments draw the line in terms of regulation,” said a fintech executive.
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Bank of Korea governor Rhee Chang Yong has expressed concern about the issuance of winning Stablecoins by non-bank entities, citing their impact on capital flows and the effectiveness of monetary policy. The central bank said it would consult major commercial banks about preparing for a second pilot test of the digital currency.
However, experts warn that by surge in interest in digital tokens, some stocks could be overvalued based on a higher basis. They urged investors to pay attention to the stock volatility.
“Winning stubcoin is likely to be introduced, but it is doubtful how much it will help increase corporate revenue,” said Hwang Seiwoon, a senior researcher at the Capital Market Institute of Korea.
“Investor expectations seem to be exaggerated, still taking into account high regulatory uncertainties. And some high-flying companies still lack the technology and infrastructure needed by their stables,” he added.
