The Bank of Korea has launched its first reported assessment of how traditional financial institutions are positioned in the virtual asset sector. On October 23, the central bank distributed a questionnaire to 18 banks and 13 securities firms, a total of 31 institutions that includes the country’s five largest lenders.

The survey seeks detailed information on each firm’s virtual-asset operations. Institutions must describe the organization and budget allocated to this work, their current status regarding market entry, the specific business activities already under way or planned, and the amounts invested in domestic and overseas cryptocurrency-related companies. They are also required to outline how they identify and manage associated risks.

Scenarios Center on Exchange Failure, Market Stress and Contagion

Beyond organizational details, the questionnaire presents several hypothetical events. One asks how the institutions would be affected if South Korea’s largest virtual-asset exchange by market share temporarily suspended operations following a major security incident. Another examines the impact of sharp declines in virtual-asset prices, including Bitcoin, followed by an extended period of reduced trading volume. A further scenario explores the consequences of substantial losses at another financial institution stemming from a virtual-asset event.

Responses are expected by early November. The central bank has indicated the material will serve as internal reference while it studies developments across the financial sector.

Timing Coincides with Heightened Attention to Exchange Security

The survey was distributed before a major security breach at a leading global exchange that involved approximately $6.3 billion. Although the questionnaire was not issued in response to that event, the incident has drawn attention to the types of operational and market disruptions the central bank is examining, including temporary service interruptions and potential spillover effects.

Regulators in South Korea have separately increased focus on cybersecurity. In October the Financial Services Commission identified deficiencies at 130 of 555 financial companies reviewed and proposed more frequent vulnerability assessments along with greater accountability for senior executives. Those steps followed security incidents involving 16 companies, among them cryptocurrency exchanges.

Stablecoin Projects Advance Amid Legislative Delays

The risk review is taking place while several South Korean financial groups continue testing stablecoin and related digital-asset services. KB Financial Group completed a pilot of a won-denominated stablecoin earlier in the year. Kakao Pay and KakaoBank later entered an arrangement to explore digital-asset infrastructure. Additional institutions have conducted payment trials involving stablecoins and QR-code systems.

The Bank of Korea has advocated bank-led issuance of stablecoins. Progress on broader legislation, including the proposed Digital Asset Basic Act, has been slowed by disagreements over which types of institutions should be permitted to issue such instruments.

Earlier financial-stability reports from the central bank noted closer correlations between cryptocurrency and equity markets during periods of stress, as well as potential risks that won-denominated stablecoins could pose to collateral arrangements, short-term interest rates and overall market conditions. Existing regulatory reporting has provided limited visibility into institutions’ digital-asset activities, which the current survey is intended to address.

The exercise maps both the scale of current engagement and the potential channels through which disruptions in the virtual-asset sector could transmit to traditional finance. Results will inform the central bank’s ongoing evaluation of financial-sector developments as institutions expand related operations.