The Central Bank of Korea calls for monitoring cryptocurrency prices due to “Kimchi Premium”
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Answer The Central Bank of Korea calls for monitoring cryptocurrency prices due to “Kimchi Premium”
While the South Korean government is looking into adjusting laws and regulations regarding cryptocurrencies, the Central Bank of Korea has called for monitoring cryptocurrency prices, and the differences between the platform.
note: The difference in cryptocurrency rates in South Korea is called “Premium Kimchi” after the famous Korean dish “Kimchi”.
The officials of the Bank of South Korea (BOK) have demanded from the Central Bank of Korea to maintain constant vigilance in the cryptocurrency exchanges in “South Korea” with the aim of keeping the cryptocurrency market, specifically Bitcoin, according to its prices on the Korean exchanges compared to the prices on the best cryptocurrency exchanges.Read:More than 31% of Latin Americans want to invest in BTC
At the peak of Bitcoin in 2017, the premium kimchi difference reached an astonishing 50% earlier in January of this year. Within weeks, Korean regulators moved to ban anonymous cryptocurrency trading in a policy that killed the premium spread.
The government’s pragmatic policies have led to the disappearance of “premium kimchi” in South Korea. At its peak, the kimchi spread on Korean cryptocurrency exchanges reached 50%, due to an unusual rise in demand and speculation,” the Korea Financial Services Commission said in June of this year. “As it is now, the price of cryptocurrencies is almost identical to other markets, which indicates the stability of the cryptocurrency market in South Korea.”
This week, central bank officials remain wary of a resurgence of market dynamism as the increased demand for cryptocurrencies amid a lack of supply drives up prices on Korean trading platforms.
“Price gaps between domestic and offshore crypto assets have repeatedly occurred, and it is difficult to resolve technical and institutional factors that adversely affect smooth capital flows in the short term,” the central bank said in a new report. The Central Bank of Korea has warned that price discrepancies may lead to out-of-control capital flows and illegal foreign exchange transactions.Read:Bitcoin Takes Over as an Alternative Amid Talks About Credit Suisse Bank Collapse
“In this regard, the price gap in cryptocurrencies is likely to widen further.”
The Central Bank of Korea is also making efforts to raise public awareness of price premiums in order to prevent investors from making “irrational investments on the basis of false hope for price increases” which could result in significant losses.
Even Premium Kimchi took a negative turn, albeit for a short period, in February due to lack of demand in the local markets but made a remarkable return over the following months with increased trading activity.
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