South Korean Banks Push for Virtual Asset Sector Entry Amid Presidential Transition

South Korea’s presidential transition is seen by banks as a key moment to push long-delayed financial reforms. Leading banks in the country are urging the incoming administration to revamp financial regulations that limit their role in the virtual asset sector. This call reflects a broader ambition among lenders to compete more effectively with tech firms and gain entry into fast-evolving nonbanking markets.

The Korea Federation of Banks recently held a strategy meeting with senior leaders from major banks, resulting in a proposal calling for regulatory changes. These changes would allow traditional financial institutions to participate more directly in the digital asset economy. The federation emphasized the need for regulatory revisions to enable banks, backed by their credibility, accessibility, and strong consumer protection standards, to enter the virtual asset business.

The timing of this push aligns with South Korea’s presidential transition. Voters cast ballots to elect a new leader after months of political uncertainty and the impeachment of President Yoon Suk Yeol. The banking industry sees this leadership change as a chance to push for long-stalled reforms. It is currently unclear when the result will emerge.

The crypto market in South Korea is already undergoing shifts. In May, South Korean authorities introduced new rules to govern digital asset transactions, part of a broader move to prepare for institutional participation in the sector. These regulations, which take effect in June, allow both nonprofit groups and virtual asset exchanges to sell cryptocurrencies. However, they must comply with tighter disclosure standards and meet enhanced listing requirements.

Despite South Korea’s ranking as a significant crypto market, the country has yet to establish a comprehensive regulatory framework. Around one-third of the population holds digital assets, and crypto-related policies featured prominently in recent campaign pledges, including promises to legalize spot crypto ETFs and regulate stablecoins.

Banks are stepping up efforts to position themselves within the space, exploring services such as stablecoin issuance and digital asset trusts. However, they remain constrained by existing rules that block entry into non-financial sectors. In contrast, tech firms face fewer restrictions and can integrate financial services into broader business operations, which banks argue creates a competitive imbalance.

To address this, the federation called for broader permissions across sectors like retail, logistics, and ICT. It also urged a shift toward principle-based regulation, allowing more flexibility for both core banking and subsidiary functions. The report criticized vague provisions in the Banking Act that make enforcement unpredictable and called for clearer definitions and time-bound regulatory actions.

Banks intend to gather more feedback and present a final set of proposals once the new government is in place. As South Korea looks to stabilize its economy and tech sector, lenders hope to play a stronger role in shaping the country’s financial trajectory.