Bank of Korea (BOK) has called on investors for more attention to the price difference between local and foreign cryptocurrency exchanges because an event popularly as a ‘kimchi premium’ can happen again after its peak in January, Yonhap news agency reported on Tuesday.
Earlier this year, such digital assets as Bitcoin and Ethereum were traded far higher in the local market than globally due to speculative investment and a rapid increase in the face of limited supply.
After the government’s ban on anonymous trading, among other measures, most of the kimchi premium has disappeared, according to state regulators. However, the risk of reappearing remains.
“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,” – the BOK said in its latest report.
Noting that the price difference could cause side effects, such as inducing illegal foreign exchange transactions, the BOK stressed the need for continued monitoring and efforts to raise public awareness to prevent local investors from going for “irrational investments based on a false hope of a price increase”.