[Financial Stability Report] Virtual Asset Market Strengthening Linkages with Stock and Bond Markets... "Systematic Monitoring Needed"

June 2026 Financial Stability Report
Won-Denominated Stablecoin Could Impact Short-Term Bond Market

The linkage between the global virtual asset market and traditional financial markets—such as stock, short-term money, and bond markets—is strengthening. As a result, there are growing calls for Korea to prepare for the potential shock virtual assets could have on stock and foreign exchange markets. In the process of introducing a won-denominated stablecoin, it is also critical to thoroughly monitor the amount issued, the composition of reserve assets, and redemptions.

In its semiannual Financial Stability Report released on June 24, the Bank of Korea analyzed the “Characteristics of Recent Price Fluctuations in the Virtual Asset Market,” stating, “The global virtual asset market is undergoing structural changes, such as diversification of investment entities, which is amplifying the degree to which the virtual asset market impacts traditional financial markets.”

Virtual asset prices have historically been influenced by global liquidity trends and the four-year Bitcoin halving cycle. However, recently, correlations with the stock market and the inherent vulnerabilities of the virtual asset market itself have become more pronounced.

In particular, there is an asymmetry in which the relationship with global liquidity becomes stronger during price declines than during price increases. In fact, since 2015, the correlation coefficient between the global broad money supply (M2) growth rate and Bitcoin was 0.33—lower than the Nasdaq’s 0.47—but during price declines, the correlation rose to 0.62 for Bitcoin and 0.59 for the Nasdaq, showing similar levels. This suggests that during periods of global liquidity tightening, price corrections for virtual assets could occur as swiftly as those for the Nasdaq.

Additionally, new trading flows such as large-scale ETF selling by institutional investors during price downturns following the introduction of U.S. spot exchange-traded funds (ETFs), algorithmic trading by hedge funds, forced liquidation of highly leveraged futures positions in offshore markets, and sales by digital asset treasury (DAT) firms have triggered further price declines.

The connection between the virtual asset market and the bond market is also growing stronger. The amount of U.S. short-term government bonds held by stablecoin issuers such as Tether and Circle now exceeds the holdings of major central banks, excluding Japan. As a result, stablecoin issuance and redemption are having an impact on short-term interest rates. According to the Bank for International Settlements (BIS), the increase in interest rates during stablecoin redemptions is two to three times greater than the decrease in rates when stablecoins are issued.

The Bank of Korea pointed out that, although spot and futures ETF trading of virtual assets is not yet allowed in Korea and corporate participation remains limited, the correlation between Bitcoin and the KOSPI is rising and should not be overlooked. The Bank also proposed building a monitoring system as stablecoin legislation progresses.

Park Sanghoon, Head of the Non-Traditional Finance Analysis Team at the Bank of Korea’s Financial Stability Department, said, “If institutional and corporate participation increases in the future, it will be important to be mindful of the possibility that price shocks in virtual assets could impact stock and foreign exchange market supply and demand through changes in asset valuations or portfolio adjustments.” He added, “If the won-denominated stablecoin is legislated and the amount issued increases, its impact on the short-term money market could grow. Therefore, a systematic monitoring system for the amount issued, composition of reserve assets, and redemptions will be necessary.”

This content was produced with the assistance of AI translation services.