South Korea’s central bank chief on Wednesday warned of ‘irrational exuberance’ in trading of virtual coins, which have risen dramatically in value this year amid frenzied speculation.
“Looking at recent frenzy over virtual currencies worldwide, I worry whether there is some dose of irrational exuberance there,” Bank of Korea Governor Lee Ju-yeol said over a year-end event with reporters on Wednesday night.
The price of bitcoin, the world’s most well-known virtual currency, lost almost one fifth of its value to $15,800 this week after peaking as high as $19,666 on Sunday, as feverish demand ebbed slightly after the exchange giant CME Group and its rival Cboe Global Markets listed bitcoin futures.
A South Korean cryptocurrency exchange, Youbit, said this week it was shutting down and filing for bankruptcy after it was hacked for the second time this year, highlighting security and regulatory concerns as trading in these virtual currencies shift on to mainstream platforms.
Policymakers from Australia to Singapore to South Korea have warned about investing in cryptocurrencies as bitcoin rallied a dizzying 19-fold this year, saying price surges are mostly driven by speculation that carried huge risks.
Governor Lee also told reporters central banks around the world are worried about excessive credit growth, noting that many nations including South Korea and China have built up high levels of debt in the private sector.
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Asked to comment on the BOK’s future monetary policy, Lee reiterated his earlier stance that the bank will continue to monitor the path of growth and inflation.
The BOK in November raised the base rate by 25 basis points, the first hike in more than six years.
