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South Korea’s inventory market has been supercharged by an investor frenzy over won-based digital cash this month, following newly elected President Lee Jae-myung’s pledge to permit crypto belongings backed by the nationwide foreign money.
Shares which have been concerned within the Bank of Korea’s digital foreign money challenge, together with Kakao Pay and LG CNS, have been on a wild experience. Kakao Pay shares greater than doubled this month and LG CNS rose nearly 70 per cent, earlier than paring some beneficial properties this week on profit-taking.
On the Kosdaq junior market, fintech safety firm Aton’s inventory jumped 80 per cent, whereas ME2ON, a cell sport producer, tripled, with its subsidiary not too long ago launching a dollar-pegged stablecoin for on line casino video games.
The wave of retail enthusiasm for the seemingly issuance of won-based stablecoins, together with expectations of shareholder-friendly insurance policies from the new government, has helped increase the benchmark Kospi Composite index nearly 30 per cent this yr to a close to four-year excessive. It has additionally made South Korea the best-performing market in Asia within the first half of the yr.
The market rally has inspired retail buyers to extend their leverage to chase beneficial properties, with excellent margin loans rising to Won20.5tn ($15bn), in keeping with knowledge from the Korea Monetary Funding Affiliation.
The recognition of shares seen as doubtlessly benefiting from won-based stablecoins comes regardless of the federal government having but to announce the main points of its cryptocurrency insurance policies.
Expectations had been fuelled by Lee’s appointment of Kim Yong-beom, a longtime advocate of digital tokens, as his chief coverage adviser, and by a parliamentary invoice proposed by the ruling celebration this month to advertise the nation’s digital asset business.
The invoice will enable corporations with as little as Won500mn in fairness capital to situation won-based stablecoins — a transfer critics warn might open the floodgates to undercapitalised gamers and trigger systemic dangers.
South Korea is likely one of the world’s most vibrant crypto markets, with a few fifth of the nation’s inhabitants buying and selling digital belongings. US dollar-pegged stablecoins buying and selling within the nation hit Won57tn within the first three months of this yr, piling stress on the Financial institution of Korea to speed up preparations to situation its personal digital currencies.
Banks, brokerages and fintech corporations are displaying robust curiosity in coming into the enterprise, though the federal government is but to resolve on the issuers and timing.
“We’re eager to do the enterprise, however we’re watching out for the place the federal government attracts the road when it comes to regulation,” mentioned a fintech business government.
Financial institution of Korea governor Rhee Chang-yong has expressed concern about any issuance of won-pegged stablecoins by non-bank entities, citing their impact on capital flows and the effectiveness of financial coverage. The central financial institution has mentioned it’s going to seek the advice of main industrial banks on getting ready a second pilot check of its digital foreign money.
Nonetheless, specialists have warned that some shares pushed greater by surging curiosity in digital tokens could also be overvalued primarily based on their fundamentals. They’ve urged buyers to train warning because of the volatility of the shares.
“Gained-pegged stablecoins are more likely to be launched, however how a lot that may assist increase company earnings is questionable,” mentioned Hwang Sei-woon, senior analysis fellow at Korea Capital Market Institute.
“Investor expectations appear to be overblown, given nonetheless excessive regulatory uncertainties. And a few of the high-flying corporations nonetheless lack the required applied sciences and infrastructure for stablecoins,” he added.
