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Major financial, tech firms plan to start transacting cryptocurrency for clients
By Lee Min-hyung
Bitcoin is emerging rapidly as a major magnet for new investors, with globally renowned financial and tech firms jumping on the cryptocurrency craze despite its volatile nature.
Up until last year, investors had divided views on bitcoin, with some regarding it as a source of speculation due to its price unpredictability. They argued bitcoin could never become a universally recognized digital currency, as it was not issued by the financial authorities.
But the once-prevalent pessimism on bitcoin is fading from the sector, with global banks and companies sharing plans to officially embrace it for customers making transactions.
They include Tesla and the Bank of New York Mellon. Last week, Tesla's announcement that it had purchased $1.5 billion (1.65 trillion won) worth of bitcoin made global headlines. The company also hinted at the possibility that it will continue to invest part of its capital in the cryptocurrency. Tesla CEO Elon Musk also expected the firm to start including bitcoin as a payment tool when customers purchase its electric vehicles in the future.
The U.S. bank also shared its plan recently to start financing bitcoin and possibly other digital currencies after completing a months-long analysis. The lender said it had decided to tap into the area amid customers' growing demand for digital currencies.
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| SpaceX owner and Tesla CEO Elon Musk speaks at the E3 gaming convention in Los Angeles, June 13, 2019. Reuters-Yonhap |
Bitcoin was traded at around 39.55 million won ($36,000) as of Jan. 17, but its value surged to over 52 million won by Feb. 15, about a week after the Tesla founder shared his plan to keep investing in the cryptocurrency and allow customers to make transactions with bitcoin.
Experts voiced their consensus that the rise of bitcoin is an inevitable trend, and Korea should jump on the bandwagon so as not to fall behind the global race for digital currencies.
"Bitcoin will keep expanding its presence in the future and the trend appears to be unstoppable, with global authorities and companies ― such as Tesla and Apple ― showing keen interest in the cryptocurrency," said Kim Dae-jong, a professor of business administration at Sejong University.
But it will take some time for countries' central authorities to make official announcements as to whether to accept bitcoin as an official digital currency for transactions, he added.
"Even if some local governments from the U.S. and other countries are moving to accept bitcoin as an official transactional tool, central governments from across the globe still remain wary of the rapid rise of bitcoin amid lingering fears that it may weaken the valuation and authority of their own currencies," Kim said.
For instance, the federal government of the U.S. does not want bitcoin or other emerging digital currencies to expand their influence, as this will weaken the authoritative position of the dollar which makes up more than 60 percent of global foreign exchange reserves, according to the professor.
The Bank of Korea (BOK) is moving to enhance its research on digital currencies to catch up with the paradigm shift. The BOK plans to virtually circulate its own central bank digital currency (CBDC) no later than the end of this year.
The lender, however, still maintains the position that it is premature to say that bitcoin is stable enough to be used for transactions at the government level.
But chances are growing that bitcoin's widening presence in the private sector will pick up more steam down the road, not just in the U.S. but in other countries, according to Kim.
"It will be very tough for any central authorities in the world to accept bitcoin as a trustworthy digital currency, but they are all going all-out to brace for a new transactional paradigm shift led by digital currencies at a time when digital currency is considered one of key growth engines of the Fourth Industrial Revolution," the professor said.
A source from the investment industry also raised hopes that more companies would soon join the global drive by embracing bitcoin as a transactional tool.
"Industry-leading tech firms as well as global investment players ― such as BlackRock and Morgan Stanley ― maintain an optimistic outlook on bitcoin despite its volatility," the source said. "On the industrial front, bitcoin is highly likely to broaden its presence in the future, even if this is not the case for Korea as of now due to regulations."
Unlike the U.S., Korean commercial lenders remain passive in embracing bitcoin. Major banks here ― KB, Shinhan, Woori and Hana ― have yet to make any official announcements over whether to enable the cryptocurrency as a tool for investment.
But they are enhancing their investments in blockchain, the technology underpinning bitcoin. KB Kookmin Bank recently established a joint venture called the Korea Digital Asset with blockchain technology firm Haechi Labs.
This was the first time KB has built a joint venture through equity investment. It aims to make rapid inroads into the lucrative digital asset market and plans to make more investments in the area.
This displays a signal that the nation's conservative banking industry is also moving to accept digital currencies.
The ongoing bitcoin craze started in December 2020 when the cryptocurrency went on an unprecedented super rally with one bitcoin's value exceeding 40 million won ($36,000) for the first time. Its value has since continued to surge after experiencing intermittent readjustment periods. As of 10 a.m. Monday, bitcoin is traded at around 52 million won.
