South Korea's Top Banks Push for Crypto Market Access

South Korea’s top banks are advocating for regulatory changes to allow for greater involvement in the country’s burgeoning cryptocurrency market, which now boasts over 16 million users, representing more than 30% of the population. The current regulatory framework restricts each cryptocurrency exchange to partnering with only one bank, a policy aimed at preventing money laundering and ensuring real-name verification. However, this limitation has created an uneven playing field, with some banks experiencing significant user growth while others are left behind.

At a recent high-level meeting, executives from South Korea’s largest financial institutions, including KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, Jeonbuk Bank, and internet-only Toss Bank, urged lawmakers from the ruling People Power Party to revisit the one-to-one partnership rule. Woori Bank’s President Jung Jin-wan argued that local exchanges should be allowed to partner with multiple banks to better serve consumer limitations and institutional demand.

The prime example of the current regulatory framework’s impact is K-Bank, which partnered with top exchange Upbit in 2020. K-Bank’s user base skyrocketed from 2.19 million to 6.6 million in a single year, and as of late 2024, that figure had nearly doubled to 12.7 million. This outsized growth, enabled by regulatory exclusivity, has made the current framework a contentious issue among South Korea’s major banking players.

The demand from South Korea's top banks reflects a broader trend of financial institutions seeking to integrate cryptocurrencies into their traditional banking services. This shift is driven by the increasing adoption of digital assets by both retail and institutional investors. The banks' push for regulatory change is a strategic move to stay competitive in a rapidly evolving financial landscape, where cryptocurrencies are becoming an increasingly important asset class.

The potential relaxation of the one-bank-per-exchange policy could have significant implications for the South Korean financial sector. It would allow banks to offer more comprehensive crypto-related services, such as custodial solutions, trading platforms, and investment products. This could attract more users to the crypto market and foster innovation within the financial industry. However, the change in policy would also require careful consideration of regulatory and security concerns. The banks and regulators would need to ensure that any new framework adequately addresses issues such as money laundering, fraud, and cybersecurity. This would involve implementing robust compliance measures and monitoring systems to protect both investors and the broader financial system.

In addition to the general public's interest in cryptocurrencies, a recent report from the country’s Ethics Commission for Government Officials revealed that more than 20% of high-ranking public servants hold crypto assets, averaging 35.1 million won each. The disclosures—totaling 14.4 billion won across 411 individuals—include holdings in mainstream tokens such as Bitcoin, Ethereum, XRP, Dogecoin, and LUNC. This further underscores the growing acceptance and integration of cryptocurrencies within South Korean society.